You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Takeda Pharmaceutical Company Limited (NYSE:TAK) a bargain? Hedge funds are getting more bullish. The number of bullish hedge fund bets rose by 25 recently. Our calculations also showed that TAK isn’t among the 30 most popular stocks among hedge funds. TAK was in 35 hedge funds’ portfolios at the end of March. There were 10 hedge funds in our database with TAK positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a glance at the new hedge fund action encompassing Takeda Pharmaceutical Company Limited (NYSE:TAK).
What have hedge funds been doing with Takeda Pharmaceutical Company Limited (NYSE:TAK)?
Heading into the second quarter of 2019, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 250% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TAK over the last 15 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Glenview Capital was the largest shareholder of Takeda Pharmaceutical Company Limited (NYSE:TAK), with a stake worth $531.9 million reported as of the end of March. Trailing Glenview Capital was Paulson & Co, which amassed a stake valued at $269.8 million. Baupost Group, Sachem Head Capital, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers have jumped into Takeda Pharmaceutical Company Limited (NYSE:TAK) headfirst. Glenview Capital, managed by Larry Robbins, created the largest position in Takeda Pharmaceutical Company Limited (NYSE:TAK). Glenview Capital had $531.9 million invested in the company at the end of the quarter. John Paulson’s Paulson & Co also initiated a $269.8 million position during the quarter. The following funds were also among the new TAK investors: Seth Klarman’s Baupost Group, Scott Ferguson’s Sachem Head Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks similar to Takeda Pharmaceutical Company Limited (NYSE:TAK). These stocks are Dominion Energy, Inc. (NYSE:D), CIGNA Corporation (NYSE:CI), CSX Corporation (NASDAQ:CSX), and Schlumberger Limited. (NYSE:SLB). This group of stocks’ market values are similar to TAK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| D | 36 | 973129 | -1 |
| CI | 47 | 3021107 | -21 |
| CSX | 44 | 5573152 | -6 |
| SLB | 49 | 2069865 | -3 |
| Average | 44 | 2909313 | -7.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $2909 million. That figure was $1712 million in TAK’s case. Schlumberger Limited. (NYSE:SLB) is the most popular stock in this table. On the other hand Dominion Energy, Inc. (NYSE:D) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks Takeda Pharmaceutical Company Limited (NYSE:TAK) is even less popular than D. Hedge funds dodged a bullet by taking a bearish stance towards TAK. Our calculations showed that the top 15 most popular hedge fund stocks returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately TAK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TAK investors were disappointed as the stock returned -15.4% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.