Do Hedge Funds Love Elanco Animal Health Incorporated (ELAN)?
The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Elanco Animal Health Incorporated (NYSE:ELAN).
Is Elanco Animal Health Incorporated (NYSE:ELAN) the right investment to pursue these days? Hedge funds were in a bearish mood. The number of bullish hedge fund positions retreated by 1 recently. Elanco Animal Health Incorporated (NYSE:ELAN) was in 42 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 43. Our calculations also showed that ELAN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to take a look at the key hedge fund action encompassing Elanco Animal Health Incorporated (NYSE:ELAN).
Do Hedge Funds Think ELAN Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the fourth quarter of 2020. By comparison, 26 hedge funds held shares or bullish call options in ELAN a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Sachem Head Capital held the most valuable stake in Elanco Animal Health Incorporated (NYSE:ELAN), which was worth $819.8 million at the end of the fourth quarter. On the second spot was Starboard Value LP which amassed $230.6 million worth of shares. Dendur Capital, Senator Investment Group, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sachem Head Capital allocated the biggest weight to Elanco Animal Health Incorporated (NYSE:ELAN), around 22.18% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, dishing out 18.41 percent of its 13F equity portfolio to ELAN.
Because Elanco Animal Health Incorporated (NYSE:ELAN) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers that elected to cut their entire stakes last quarter. It's worth mentioning that Frank Fu's CaaS Capital dumped the biggest stake of all the hedgies tracked by Insider Monkey, valued at about $42.6 million in stock. Brandon Haley's fund, Holocene Advisors, also sold off its stock, about $37.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Elanco Animal Health Incorporated (NYSE:ELAN) but similarly valued. These stocks are Pool Corporation (NASDAQ:POOL), PulteGroup, Inc. (NYSE:PHM), The J.M. Smucker Company (NYSE:SJM), Whirlpool Corporation (NYSE:WHR), Tata Motors Limited (NYSE:TTM), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), and Williams-Sonoma, Inc. (NYSE:WSM). All of these stocks' market caps resemble ELAN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position POOL,41,1014649,8 PHM,42,1050252,2 SJM,33,689844,-1 WHR,28,1255044,-4 TTM,8,67734,1 BMRN,43,1269182,-8 WSM,29,758326,0 Average,32,872147,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $872 million. That figure was $1710 million in ELAN's case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Tata Motors Limited (NYSE:TTM) is the least popular one with only 8 bullish hedge fund positions. Elanco Animal Health Incorporated (NYSE:ELAN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ELAN is 81.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on ELAN as the stock returned 17.8% since the end of Q1 (through 6/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
