Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 31% through December 23rd. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Neurocrine Biosciences, Inc. (NASDAQ:NBIX).
Neurocrine Biosciences, Inc. (NASDAQ:NBIX) investors should pay attention to an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that NBIX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
To the average investor there are numerous formulas market participants can use to size up stocks. A duo of the best formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top investment managers can trounce the market by a healthy margin (see the details here).
Samuel Isaly of OrbiMed Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a peek at the key hedge fund action regarding Neurocrine Biosciences, Inc. (NASDAQ:NBIX).
Hedge fund activity in Neurocrine Biosciences, Inc. (NASDAQ:NBIX)
At the end of the third quarter, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NBIX over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Perceptive Advisors was the largest shareholder of Neurocrine Biosciences, Inc. (NASDAQ:NBIX), with a stake worth $365.8 million reported as of the end of September. Trailing Perceptive Advisors was OrbiMed Advisors, which amassed a stake valued at $141.9 million. Healthcor Management, Baker Bros. Advisors, and Rock Springs Capital Management 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 Perceptive Advisors allocated the biggest weight to Neurocrine Biosciences, Inc. (NASDAQ:NBIX), around 9.86% of its 13F portfolio. Healthcor Management is also relatively very bullish on the stock, designating 5.09 percent of its 13F equity portfolio to NBIX.
As one would reasonably expect, key hedge funds were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest call position in Neurocrine Biosciences, Inc. (NASDAQ:NBIX). Balyasny Asset Management had $21.6 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $9.3 million position during the quarter. The following funds were also among the new NBIX investors: Brian Ashford-Russell and Tim Woolley’s Polar Capital, Paul Marshall and Ian Wace’s Marshall Wace, and Phill Gross and Robert Atchinson’s Adage Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Neurocrine Biosciences, Inc. (NASDAQ:NBIX) but similarly valued. These stocks are Carlisle Companies, Inc. (NYSE:CSL), Lamar Advertising Co (NASDAQ:LAMR), Towers Watson & Co (NYSE:TW), and Gaming and Leisure Properties Inc (NASDAQ:GLPI). This group of stocks’ market values are similar to NBIX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSL | 30 | 454941 | 5 |
| LAMR | 28 | 238134 | 4 |
| TW | 37 | 400592 | 0 |
| GLPI | 31 | 773259 | 4 |
| Average | 31.5 | 466732 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $467 million. That figure was $1102 million in NBIX’s case. Towers Watson & Co (NYSE:TW) is the most popular stock in this table. On the other hand Lamar Advertising Co (NASDAQ:LAMR) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on NBIX as the stock returned 51.8% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
