Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Regeneron Pharmaceuticals Inc (NASDAQ:REGN) based on those filings.
Is Regeneron Pharmaceuticals Inc (NASDAQ:REGN) undervalued? The smart money is turning bullish. The number of bullish hedge fund bets increased by 2 recently. Our calculations also showed that REGN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). REGN was in 37 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 35 hedge funds in our database with REGN holdings 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s view the key hedge fund action surrounding Regeneron Pharmaceuticals Inc (NASDAQ:REGN).
What does smart money think about Regeneron Pharmaceuticals Inc (NASDAQ:REGN)?
At Q4’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards REGN over the last 18 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Regeneron Pharmaceuticals Inc (NASDAQ:REGN) was held by Citadel Investment Group, which reported holding $201.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $148.6 million position. Other investors bullish on the company included Healthcor Management LP, AQR Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Healthcor Management LP allocated the biggest weight to Regeneron Pharmaceuticals Inc (NASDAQ:REGN), around 4.99% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, designating 3.24 percent of its 13F equity portfolio to REGN.
As aggregate interest increased, key money managers were breaking ground themselves. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, established the biggest position in Regeneron Pharmaceuticals Inc (NASDAQ:REGN). Healthcor Management LP had $140 million invested in the company at the end of the quarter. Kevin C. Tang’s Tang Capital Management also initiated a $16.9 million position during the quarter. The other funds with new positions in the stock are Vishal Saluja and Pham Quang’s Endurant Capital Management, Charles Clough’s Clough Capital Partners, and David Costen Haley’s HBK Investments.
Let’s go over hedge fund activity in other stocks similar to Regeneron Pharmaceuticals Inc (NASDAQ:REGN). We will take a look at Barclays PLC (NYSE:BCS), Ecopetrol S.A. (NYSE:EC), Keurig Dr Pepper Inc. (NASDAQ:KDP), and The Dow Chemical Company (NYSE:DOW). All of these stocks’ market caps match REGN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BCS | 11 | 115501 | -4 |
| EC | 11 | 229258 | 1 |
| KDP | 26 | 593887 | 3 |
| DOW | 34 | 165271 | -3 |
| Average | 20.5 | 275979 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $276 million. That figure was $931 million in REGN’s case. The Dow Chemical Company (NYSE:DOW) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on REGN as the stock returned 23.8% so far in Q1 (through March 11th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
