In this article we will take a look at whether hedge funds think Elanco Animal Health Incorporated (NYSE:ELAN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Elanco Animal Health Incorporated (NYSE:ELAN) a buy, sell, or hold? The best stock pickers were turning less bullish. The number of bullish hedge fund positions dropped by 10 in recent months. Elanco Animal Health Incorporated (NYSE:ELAN) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that ELAN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a look at the fresh hedge fund action encompassing Elanco Animal Health Incorporated (NYSE:ELAN).
Do Hedge Funds Think ELAN Is A Good Stock To Buy Now?
At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in ELAN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Elanco Animal Health Incorporated (NYSE:ELAN) was held by Sachem Head Capital, which reported holding $887.7 million worth of stock at the end of September. It was followed by Starboard Value LP with a $233.2 million position. Other investors bullish on the company included Sculptor Capital, Dendur Capital, and Senator Investment Group. In terms of the portfolio weights assigned to each position Sachem Head Capital allocated the biggest weight to Elanco Animal Health Incorporated (NYSE:ELAN), around 21.89% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, earmarking 16.08 percent of its 13F equity portfolio to ELAN.
Due to the fact that Elanco Animal Health Incorporated (NYSE:ELAN) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few money managers that slashed their full holdings last quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management dropped the largest stake of the 750 funds monitored by Insider Monkey, comprising close to $34.7 million in stock. Simon Sadler’s fund, Segantii Capital, also sold off its stock, about $20.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 10 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Elanco Animal Health Incorporated (NYSE:ELAN). These stocks are Check Point Software Technologies Ltd. (NASDAQ:CHKP), Doximity Inc. (NYSE:DOCS), Franklin Resources, Inc. (NYSE:BEN), Masimo Corporation (NASDAQ:MASI), Logitech International SA (NASDAQ:LOGI), FactSet Research Systems Inc. (NYSE:FDS), and Huazhu Group Limited (NASDAQ:HTHT). This group of stocks’ market valuations resemble ELAN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHKP | 30 | 621231 | 1 |
| DOCS | 19 | 554548 | -16 |
| BEN | 28 | 359424 | -2 |
| MASI | 31 | 560090 | 3 |
| LOGI | 20 | 400160 | 0 |
| FDS | 28 | 775126 | 0 |
| HTHT | 28 | 775810 | 1 |
| Average | 26.3 | 578056 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $578 million. That figure was $1850 million in ELAN’s case. Masimo Corporation (NASDAQ:MASI) is the most popular stock in this table. On the other hand Doximity Inc. (NYSE:DOCS) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Elanco Animal Health Incorporated (NYSE:ELAN) is more popular among hedge funds. Our overall hedge fund sentiment score for ELAN is 67.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately ELAN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ELAN were disappointed as the stock returned -9.9% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Elanco Animal Health Inc (NYSE:ELAN)
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Disclosure: None. This article was originally published at Insider Monkey.
