In this article we will analyze whether Legend Biotech Corporation (NASDAQ:LEGN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Legend Biotech Corporation (NASDAQ:LEGN) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 28. LEGN shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 12 hedge funds in our database with LEGN positions at the end of the first quarter. Our calculations also showed that LEGN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Peter Kolchinsky of RA Capital Management
Keeping this in mind we’re going to take a peek at the new hedge fund action regarding Legend Biotech Corporation (NASDAQ:LEGN).
Do Hedge Funds Think LEGN Is A Good Stock To Buy Now?
At second quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 58% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LEGN over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Hudson Bay Capital Management held the most valuable stake in Legend Biotech Corporation (NASDAQ:LEGN), which was worth $77.1 million at the end of the second quarter. On the second spot was Baker Bros. Advisors which amassed $68.3 million worth of shares. Consonance Capital Management, RA Capital Management, and Vivo Capital 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 Consonance Capital Management allocated the biggest weight to Legend Biotech Corporation (NASDAQ:LEGN), around 8.14% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, setting aside 1.7 percent of its 13F equity portfolio to LEGN.
Consequently, specific money managers have been driving this bullishness. RA Capital Management, managed by Peter Kolchinsky, created the largest position in Legend Biotech Corporation (NASDAQ:LEGN). RA Capital Management had $40.1 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker’s Woodline Partners also made a $11.2 million investment in the stock during the quarter. The other funds with brand new LEGN positions are D. E. Shaw’s D E Shaw, David Kowitz and Sheldon Kasowitz’s Indus Capital, and Renaissance Technologies.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Legend Biotech Corporation (NASDAQ:LEGN) but similarly valued. These stocks are SL Green Realty Corp (NYSE:SLG), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), Pure Storage, Inc. (NYSE:PSTG), BWX Technologies Inc (NYSE:BWXT), NeoGenomics, Inc. (NASDAQ:NEO), Tripadvisor Inc (NASDAQ:TRIP), and Saia Inc (NASDAQ:SAIA). All of these stocks’ market caps resemble LEGN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SLG | 21 | 144000 | 0 |
| ASR | 5 | 43748 | -3 |
| PSTG | 31 | 791397 | 1 |
| BWXT | 20 | 160928 | 4 |
| NEO | 13 | 108232 | -2 |
| TRIP | 36 | 1178260 | -9 |
| SAIA | 22 | 418195 | 6 |
| Average | 21.1 | 406394 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $371 million in LEGN’s case. Tripadvisor Inc (NASDAQ:TRIP) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 5 bullish hedge fund positions. Legend Biotech Corporation (NASDAQ:LEGN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LEGN is 52.9. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on LEGN as the stock returned 29.3% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
