The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Incyte Corporation (NASDAQ:INCY).
Is Incyte Corporation (NASDAQ:INCY) a buy here? The smart money is selling. The number of bullish hedge fund positions shrunk by 6 lately. Our calculations also showed that INCY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 51 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Felix Baker of Baker Bros.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the recent hedge fund action encompassing Incyte Corporation (NASDAQ:INCY).
Hedge fund activity in Incyte Corporation (NASDAQ:INCY)
At the end of the first quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. By comparison, 39 hedge funds held shares or bullish call options in INCY a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Baker Bros. Advisors was the largest shareholder of Incyte Corporation (NASDAQ:INCY), with a stake worth $2341.8 million reported as of the end of September. Trailing Baker Bros. Advisors was Renaissance Technologies, which amassed a stake valued at $337 million. AQR Capital Management, Two Sigma Advisors, and GLG Partners 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 Incyte Corporation (NASDAQ:INCY), around 14.42% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, earmarking 4.5 percent of its 13F equity portfolio to INCY.
Since Incyte Corporation (NASDAQ:INCY) has witnessed a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedgies that decided to sell off their full holdings heading into Q4. Intriguingly, David Goel and Paul Ferri’s Matrix Capital Management dumped the largest position of the “upper crust” of funds followed by Insider Monkey, totaling about $168.9 million in stock, and Michael Rockefeller and KarláKroeker’s Woodline Partners was right behind this move, as the fund dumped about $18.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 6 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Incyte Corporation (NASDAQ:INCY) but similarly valued. These stocks are Northern Trust Corporation (NASDAQ:NTRS), Church & Dwight Co., Inc. (NYSE:CHD), Smith & Nephew plc (NYSE:SNN), and Tiffany & Co. (NYSE:TIF). All of these stocks’ market caps match INCY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTRS | 27 | 330348 | -8 |
| CHD | 36 | 506943 | -1 |
| SNN | 9 | 89054 | 6 |
| TIF | 69 | 2915572 | 7 |
| Average | 35.25 | 960479 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $960 million. That figure was $3325 million in INCY’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 9 bullish hedge fund positions. Incyte Corporation (NASDAQ:INCY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on INCY as the stock returned 39.2% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
