Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN).
Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) was in 35 hedge funds’ portfolios at the end of March. ALXN shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 41 hedge funds in our database with ALXN holdings at the end of the previous quarter. Our calculations also showed that ALXN isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the recent hedge fund action regarding Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN).
How are hedge funds trading Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)?
At the end of the first quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the fourth quarter of 2018. On the other hand, there were a total of 44 hedge funds with a bullish position in ALXN 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.
Among these funds, Baker Bros. Advisors held the most valuable stake in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), which was worth $1156.9 million at the end of the first quarter. On the second spot was OrbiMed Advisors which amassed $264.6 million worth of shares. Moreover, AQR Capital Management, Palo Alto Investors, and Renaissance Technologies were also bullish on Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), allocating a large percentage of their portfolios to this stock.
Since Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) has faced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that elected to cut their entire stakes in the third quarter. Interestingly, David Cohen and Harold Levy’s Iridian Asset Management sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling about $242.9 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dropped about $75 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 6 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) but similarly valued. These stocks are Public Service Enterprise Group Incorporated (NYSE:PEG), HP Inc. (NYSE:HPQ), Credit Suisse Group AG (NYSE:CS), and Thomson Reuters Corporation (NYSE:TRI). This group of stocks’ market caps are closest to ALXN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PEG | 28 | 1019022 | -2 |
| HPQ | 35 | 868419 | -5 |
| CS | 14 | 194661 | 0 |
| TRI | 17 | 227269 | -2 |
| Average | 23.5 | 577343 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $577 million. That figure was $2312 million in ALXN’s case. HP Inc. (NYSE:HPQ) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 14 bullish hedge fund positions. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ALXN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ALXN were disappointed as the stock returned -10.9% during the same period 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 Q2.
Disclosure: None. This article was originally published at Insider Monkey.
