Hedge Funds Are Betting On Biogen Inc. (BIIB)
In this article you are going to find out whether hedge funds think Biogen Inc. (NASDAQ:BIIB) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Biogen Inc. (NASDAQ:BIIB) investors should be aware of an increase in support from the world's most elite money managers lately. BIIB was in 70 hedge funds' portfolios at the end of March. There were 61 hedge funds in our database with BIIB holdings at the end of the previous quarter. Our calculations also showed that BIIB isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Alex Denner of Sarissa Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a glance at the key hedge fund action regarding Biogen Inc. (NASDAQ:BIIB).
How have hedgies been trading Biogen Inc. (NASDAQ:BIIB)?
Heading into the second quarter of 2020, a total of 70 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from one quarter earlier. By comparison, 49 hedge funds held shares or bullish call options in BIIB a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Biogen Inc. (NASDAQ:BIIB) was held by Renaissance Technologies, which reported holding $1415.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $661.5 million position. Other investors bullish on the company included Arrowstreet Capital, Berkshire Hathaway, and Sarissa Capital Management. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Biogen Inc. (NASDAQ:BIIB), around 25.95% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 6.89 percent of its 13F equity portfolio to BIIB.
Consequently, key money managers were leading the bulls' herd. Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, assembled the most valuable position in Biogen Inc. (NASDAQ:BIIB). Rock Springs Capital Management had $56.9 million invested in the company at the end of the quarter. Aaron Cowen's Suvretta Capital Management also made a $48.6 million investment in the stock during the quarter. The other funds with brand new BIIB positions are Brian Ashford-Russell and Tim Woolley's Polar Capital, Arthur B Cohen and Joseph Healey's Healthcor Management LP, and Michael Castor's Sio Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Biogen Inc. (NASDAQ:BIIB) but similarly valued. These stocks are The Blackstone Group Inc. (NYSE:BX), ServiceNow Inc (NYSE:NOW), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and Equinix, Inc. (REIT) (NASDAQ:EQIX). All of these stocks' market caps are closest to BIIB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BX,49,1523046,2 NOW,85,3985632,10 REGN,42,838224,5 EQIX,55,1950326,12 Average,57.75,2074307,7.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 57.75 hedge funds with bullish positions and the average amount invested in these stocks was $2074 million. That figure was $4498 million in BIIB's case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the least popular one with only 42 bullish hedge fund positions. Biogen Inc. (NASDAQ:BIIB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately BIIB wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BIIB were disappointed as the stock returned -3.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
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