We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Amarin Corporation plc (NASDAQ:AMRN) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Amarin Corporation plc (NASDAQ:AMRN) a cheap investment now? Prominent investors are getting more bullish. The number of bullish hedge fund bets went up by 6 in recent months. Our calculations also showed that AMRN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). AMRN was in 36 hedge funds’ portfolios at the end of December. There were 30 hedge funds in our database with AMRN positions at the end of the previous quarter.
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.
Felix Baker of Baker Bros.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the fresh hedge fund action encompassing Amarin Corporation plc (NASDAQ:AMRN).
How are hedge funds trading Amarin Corporation plc (NASDAQ:AMRN)?
At Q4’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards AMRN over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Amarin Corporation plc (NASDAQ:AMRN) was held by Baker Bros. Advisors, which reported holding $739.6 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $152.4 million position. Other investors bullish on the company included Rock Springs Capital Management, Farallon Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Logos Capital allocated the biggest weight to Amarin Corporation plc (NASDAQ:AMRN), around 5.09% of its 13F portfolio. Baker Bros. Advisors is also relatively very bullish on the stock, setting aside 3.93 percent of its 13F equity portfolio to AMRN.
As aggregate interest increased, specific money managers have jumped into Amarin Corporation plc (NASDAQ:AMRN) headfirst. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, assembled the most outsized position in Amarin Corporation plc (NASDAQ:AMRN). Healthcor Management LP had $33.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $31.6 million investment in the stock during the quarter. The following funds were also among the new AMRN investors: D. E. Shaw’s D E Shaw, Arsani William’s Logos Capital, and Christopher James’s Partner Fund Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Amarin Corporation plc (NASDAQ:AMRN) but similarly valued. These stocks are PVH Corp (NYSE:PVH), BioNTech SE (NASDAQ:BNTX), Erie Indemnity Company (NASDAQ:ERIE), and Commerce Bancshares, Inc. (NASDAQ:CBSH). This group of stocks’ market caps match AMRN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PVH | 29 | 1023740 | -3 |
| BNTX | 4 | 29499 | 4 |
| ERIE | 20 | 92549 | 0 |
| CBSH | 10 | 43262 | 1 |
| Average | 15.75 | 297263 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $1534 million in AMRN’s case. PVH Corp (NYSE:PVH) is the most popular stock in this table. On the other hand BioNTech SE (NASDAQ:BNTX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Amarin Corporation plc (NASDAQ:AMRN) 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 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately AMRN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMRN were disappointed as the stock returned -52.1% during the first two and a half months of 2020 (through March 16th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
