Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has experienced a decrease in support from the world’s most elite money managers lately. REGN was in 31 hedge funds’ portfolios at the end of the first quarter of 2019. There were 35 hedge funds in our database with REGN holdings at the end of the previous quarter. Our calculations also showed that REGN 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 view the recent hedge fund action regarding Regeneron Pharmaceuticals Inc (NASDAQ:REGN).
How are hedge funds trading Regeneron Pharmaceuticals Inc (NASDAQ:REGN)?
At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards REGN over the last 15 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Regeneron Pharmaceuticals Inc (NASDAQ:REGN), with a stake worth $157.2 million reported as of the end of March. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $137.6 million. Arrowstreet Capital, Two Sigma Advisors, and OrbiMed Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Since Regeneron Pharmaceuticals Inc (NASDAQ:REGN) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there is a sect of money managers that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Arthur B Cohen and Joseph Healey’s Healthcor Management LP sold off the biggest investment of the 700 funds followed by Insider Monkey, valued at an estimated $215.6 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $63 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Regeneron Pharmaceuticals Inc (NASDAQ:REGN). We will take a look at HCA Healthcare Inc (NYSE:HCA), Banco de Chile (NYSE:BCH), Brookfield Asset Management Inc. (NYSE:BAM), and ServiceNow Inc (NYSE:NOW). This group of stocks’ market valuations are similar to REGN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HCA | 51 | 2667753 | -5 |
| BCH | 4 | 73861 | 0 |
| BAM | 26 | 824917 | 1 |
| NOW | 65 | 3793991 | 4 |
| Average | 36.5 | 1840131 | 0 |
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 $1840 million. That figure was $900 million in REGN’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 4 bullish hedge fund positions. Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 REGN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); REGN investors were disappointed as the stock returned -25% during the same time 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.
