Do Hedge Funds Love Celgene Corporation (CELG)?

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the second half of last year and extended the losses so far in 2016, still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Celgene Corporation (NASDAQ:CELG) changed recently.

Celgene Corporation (NASDAQ:CELG) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. At the end of this article we will also compare CELG to other stocks, including Eli Lilly & Co. (NYSE:LLY), 3M Co (NYSE:MMM), and Walgreens Boots Alliance Inc (NASDAQ:WBA) to get a better sense of its popularity.

In today’s marketplace there are many methods that stock market investors put to use to evaluate stocks. A couple of the most innovative methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the market by a healthy amount (see the details here).

Over the past year, Celgene’s stock has lost almost 12%, amid an overall decline registered by most stocks in the biotech industry. For the last quarter, the company posted adjusted earnings of $1.18 per share, excluding the cost of acquisition of Receptos Inc. for $7.2 billion last year, which compares with $1.22 in EPS expected by analysts. At the same time, the  revenue went up by 23% on the year to $2.56 billion, fueled by higher sales of its flagship drug, Revlimid, which increased by 18% worldwide. Analysts, on the other hand, expected sales of $2.54 billion.

For the current quarter, Celgene anticipates earnings per share in the range of $1.27 to $1.30, which is close to the analysts’ estimates of $1.30. Moreover, for the full year, the company projects sales in the range of $10.5 billion to $11 billion.

With all of this in mind, we’re going to take a gander at the new action regarding Celgene Corporation (NASDAQ:CELG).

What does the smart money think about Celgene Corporation (NASDAQ:CELG)?

At the end of the fourth quarter, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 3% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the number one position in Celgene Corporation (NASDAQ:CELG). OrbiMed Advisors has a $439 million position in the stock, comprising 4% of its 13F portfolio. Sitting at the No. 2 spot is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $157.5 million position; the fund has 4.3% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish encompass Phill Gross and Robert Atchinson’s Adage Capital Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management and Ken Griffin’s Citadel Investment Group.

Consequently, key money managers have jumped into Celgene Corporation (NASDAQ:CELG) headfirst. Citadel Investment Group established the biggest position in Celgene Corporation (NASDAQ:CELG). Citadel Investment Group had $139.5 million invested in the company at the end of the fourth quarter. Anand Parekh’s Alyeska Investment Group also initiated a $108.3 million position during the quarter. The following funds were also among the new CELG investors: Steve Cohen’s Point72 Asset Management, Pasco Alfaro / Richard Tumure’s Miura Global Management, and Charles Frumberg’s Emancipation Capital.

Let’s now review hedge fund activity in other stocks similar to Celgene Corporation (NASDAQ:CELG). These stocks are Eli Lilly & Co. (NYSE:LLY), 3M Co (NYSE:MMM), Walgreens Boots Alliance Inc (NASDAQ:WBA), and China Life Insurance Company Ltd. (ADR) (NYSE:LFC). This group of stocks’ market values are closest to CELG’s market value.

As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $2.68 billion. That figure was $2.24 billion in CELG’s case. Walgreens Boots Alliance Inc (NASDAQ:WBA) is the most popular stock in this table. On the other hand China Life Insurance Company Ltd. (ADR) (NYSE:LFC) is the least popular one with only seven bullish hedge fund positions. Celgene Corporation (NASDAQ:CELG) 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. In this regard WBA might be a better candidate to consider a long position.