We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Amneal Pharmaceuticals, Inc. (NYSE:AMRX).
Is Amneal Pharmaceuticals, Inc. (NYSE:AMRX) ready to rally soon? Investors who are in the know are getting less bullish. The number of long hedge fund positions were trimmed by 1 recently. Our calculations also showed that AMRX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). AMRX was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. There were 10 hedge funds in our database with AMRX positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Platt of BlueCrest Capital Mgmt.
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the recent hedge fund action encompassing Amneal Pharmaceuticals, Inc. (NYSE:AMRX).
Hedge fund activity in Amneal Pharmaceuticals, Inc. (NYSE:AMRX)
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AMRX over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Point72 Asset Management was the largest shareholder of Amneal Pharmaceuticals, Inc. (NYSE:AMRX), with a stake worth $2.9 million reported as of the end of September. Trailing Point72 Asset Management was Millennium Management, which amassed a stake valued at $2.2 million. Citadel Investment Group, Two Sigma Advisors, and D E Shaw 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 Algert Coldiron Investors allocated the biggest weight to Amneal Pharmaceuticals, Inc. (NYSE:AMRX), around 0.07% of its 13F portfolio. Point72 Asset Management is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to AMRX.
Judging by the fact that Amneal Pharmaceuticals, Inc. (NYSE:AMRX) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few hedge funds who were dropping their entire stakes by the end of the third quarter. Intriguingly, Anand Parekh’s Alyeska Investment Group dumped the largest position of the 750 funds tracked by Insider Monkey, comprising close to $1.9 million in stock. Renaissance Technologies, also sold off its stock, about $0.5 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Amneal Pharmaceuticals, Inc. (NYSE:AMRX). These stocks are Phreesia, Inc. (NYSE:PHR), Community Healthcare Trust Inc (NYSE:CHCT), Hecla Mining Company (NYSE:HL), and Phibro Animal Health Corp (NASDAQ:PAHC). All of these stocks’ market caps match AMRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PHR | 9 | 33757 | 9 |
| CHCT | 10 | 88796 | 2 |
| HL | 10 | 22102 | 2 |
| PAHC | 17 | 52455 | 1 |
| Average | 11.5 | 49278 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $49 million. That figure was $8 million in AMRX’s case. Phibro Animal Health Corp (NASDAQ:PAHC) is the most popular stock in this table. On the other hand Phreesia, Inc. (NYSE:PHR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Amneal Pharmaceuticals, Inc. (NYSE:AMRX) is even less popular than PHR. Hedge funds clearly dropped the ball on AMRX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on AMRX as the stock returned 29.7% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
