Does Incyte Corporation (INCY) Represent a Good Addition to Your Portfolio?

The market has been volatile due to elections and the potential of another Federal Reserve rate increase. Small cap stocks have been on a tear, as the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. SEC filings and hedge fund investor letters indicate that the smart money seems to be getting back in stocks, and the funds’ movements is one of the reasons why small-cap stocks are red hot. In this article, we analyze what the smart money thinks of Incyte Corporation (NASDAQ:INCY) and find out how it is affected by hedge funds’ moves.

There were 45 funds in our database that held shares of Incyte Corporation at the end of September. The company has experienced an increase in hedge fund interest, as there had been 32 funds with INCY positions at the end of the previous quarter. At the end of this article we will also compare INCY to other stocks including Rockwell Automation (NYSE:ROK), Essex Property Trust Inc (NYSE:ESS), and Ameriprise Financial, Inc. (NYSE:AMP) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s analyze the fresh action surrounding Incyte Corporation (NASDAQ:INCY).

Hedge fund activity in Incyte Corporation (NASDAQ:INCY)

At the end of the third quarter, a total of 45 funds tracked by Insider Monkey were bullish on Incyte Corporation, which represents an increase of 41% from the second quarter of 2016. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Julian Baker and Felix Baker’s Baker Bros. Advisors has the number one position in Incyte Corporation (NASDAQ:INCY), worth close to $2.2157 billion, comprising 20.1% of its total 13F portfolio. Sitting at the No. 2 spot is OrbiMed Advisors, led by Samuel Isaly, holding a $174.5 million position; the fund has 2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include David Goel and Paul Ferri’s Matrix Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Dmitry Balyasny’s Balyasny Asset Management.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. HealthCor Management LP, managed by Arthur B Cohen and Joseph Healey, assembled the most valuable position in Incyte Corporation (NASDAQ:INCY). Healthcor Management LP had $56.6 million invested in the company at the end of the quarter. Andreas Halvorsen’s Viking Global also initiated a $47.5 million position during the quarter. The other funds with new positions in the stock are Jason Karp’s Tourbillon Capital Partners, John Burbank’s Passport Capital, and Paul Sinclair’s Blue Jay Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Incyte Corporation (NASDAQ:INCY) but similarly valued. We will take a look at Rockwell Automation (NYSE:ROK), Essex Property Trust Inc (NYSE:ESS), Ameriprise Financial, Inc. (NYSE:AMP), and FirstEnergy Corp. (NYSE:FE). This group of stocks’ market values resemble INCY’s market value.

As you can see these stocks had an average of 27 funds with bullish positions and the average amount invested in these stocks was $596 million, which is significantly lower than the $3.25 billion that investors amassed in INCY. FirstEnergy Corp. (NYSE:FE) is the most popular stock in this table. On the other hand Essex Property Trust Inc (NYSE:ESS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Incyte Corporation (NASDAQ:INCY) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.