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 (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Seattle Genetics, Inc. (NASDAQ:SGEN).
Seattle Genetics, Inc. (NASDAQ:SGEN) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. SGEN was in 36 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 29 hedge funds in our database with SGEN holdings at the end of the previous quarter. Our calculations also showed that SGEN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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 was able to identify in advance a select group of hedge fund holdings that 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. Keeping this in mind let’s take a peek at the new hedge fund action surrounding Seattle Genetics, Inc. (NASDAQ:SGEN).
Hedge fund activity in Seattle Genetics, Inc. (NASDAQ:SGEN)
Heading into the first quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SGEN over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Baker Bros. Advisors held the most valuable stake in Seattle Genetics, Inc. (NASDAQ:SGEN), which was worth $5719.5 million at the end of the third quarter. On the second spot was Matrix Capital Management which amassed $182.6 million worth of shares. Woodline Partners, Point72 Asset Management, and Point72 Asset Management 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 Baker Bros. Advisors allocated the biggest weight to Seattle Genetics, Inc. (NASDAQ:SGEN), around 30.41% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, designating 3.97 percent of its 13F equity portfolio to SGEN.
Consequently, key money managers were leading the bulls’ herd. Woodline Partners, managed by Michael Rockefeller and Karl Kroeker, established the most outsized position in Seattle Genetics, Inc. (NASDAQ:SGEN). Woodline Partners had $81.9 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $21.9 million position during the quarter. The other funds with new positions in the stock are Greg Martinez’s Parkman Healthcare Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Bhagwan Jay Rao’s Integral Health Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Seattle Genetics, Inc. (NASDAQ:SGEN) but similarly valued. We will take a look at Franco-Nevada Corporation (NYSE:FNV), Cadence Design Systems Inc (NASDAQ:CDNS), D.R. Horton, Inc. (NYSE:DHI), and Interactive Brokers Group, Inc. (NASDAQ:IBKR). This group of stocks’ market valuations match SGEN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FNV | 24 | 796996 | 1 |
| CDNS | 42 | 1534323 | 6 |
| DHI | 51 | 2240658 | -8 |
| IBKR | 29 | 886155 | 4 |
| Average | 36.5 | 1364533 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.5 hedge funds with bullish positions and the average amount invested in these stocks was $1365 million. That figure was $6197 million in SGEN’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 24 bullish hedge fund positions. Seattle Genetics, Inc. (NASDAQ:SGEN) is not the least popular stock in this group but hedge fund interest is still below average. 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 but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on SGEN as the stock returned -16.2% during the same time period and outperformed the market by an even larger margin.
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.
