Did Hedge Funds Get Seagen Inc. (SGEN) Right?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Seagen Inc. (NASDAQ:SGEN) and determine whether hedge funds had an edge regarding this stock.

Is Seagen Inc. (NASDAQ:SGEN) going to take off soon? Prominent investors were taking a bullish view. The number of long hedge fund bets increased by 3 lately. Seagen Inc. (NASDAQ:SGEN) was in 40 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SGEN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 37 hedge funds in our database with SGEN positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a gander at the key hedge fund action encompassing Seagen Inc. (NASDAQ:SGEN).

Robert Pohly of Samlyn Capital

Do Hedge Funds Think SGEN Is A Good Stock To Buy Now?

At third quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards SGEN over the last 25 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Among these funds, Baker Bros. Advisors held the most valuable stake in Seagen Inc. (NASDAQ:SGEN), which was worth $8029.5 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $210 million worth of shares. Marshall Wace LLP, Point72 Asset Management, and Redmile Group 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 Baker Bros. Advisors allocated the biggest weight to Seagen Inc. (NASDAQ:SGEN), around 35.26% of its 13F portfolio. Tri Locum Partners is also relatively very bullish on the stock, dishing out 6.5 percent of its 13F equity portfolio to SGEN.

As one would reasonably expect, key money managers were breaking ground themselves. Antipodes Partners, managed by Jacob Mitchell, established the biggest position in Seagen Inc. (NASDAQ:SGEN). Antipodes Partners had $52.8 million invested in the company at the end of the quarter. OrbiMed Advisors also made a $45.5 million investment in the stock during the quarter. The following funds were also among the new SGEN investors: Robert Pohly’s Samlyn Capital, Prashanth Jayaram’s Tri Locum Partners, and Bhagwan Jay Rao’s Integral Health Asset Management.

Let’s check out hedge fund activity in other stocks similar to Seagen Inc. (NASDAQ:SGEN). We will take a look at Equifax Inc. (NYSE:EFX), McKesson Corporation (NYSE:MCK), Public Service Enterprise Group Incorporated (NYSE:PEG), Suncor Energy Inc. (NYSE:SU), Arthur J. Gallagher & Co. (NYSE:AJG), American Water Works Company, Inc. (NYSE:AWK), and Nokia Corporation (NYSE:NOK). This group of stocks’ market caps are closest to SGEN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1449 million. That figure was $9471 million in SGEN’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 22 bullish hedge fund positions. Seagen Inc. (NASDAQ:SGEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SGEN is 69. 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. 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 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, SGEN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SGEN were disappointed as the stock returned -20.8% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.