Is Alexion Pharmaceuticals, Inc. (ALXN) a Good Stock To Buy?

The SEC requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings discloses the funds’ positions on September 30. We at Insider Monkey have compiled an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) based on those filings.

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) was included in the portfolios of 42 funds from our database at the end of September. The company registered a decrease in hedge fund interest during the third quarter, as there had been 46 funds long Alexion at the end of the previous quarter. At the end of this article we will also compare ALXN to other stocks including O’Reilly Automotive Inc (NASDAQ:ORLY), Applied Materials, Inc. (NASDAQ:AMAT), and Prologis Inc (NYSE:PLD) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Hedge fund activity in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN)

As stated earlier, heading into the fourth quarter, 42 funds followed by Insider Monkey were bullish on Alexion Pharmaceuticals, a decline of 9% from the previous quarter, after the stock soared to a yearly high in hedge fund ownership on June 30. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Baker Bros. Advisors, managed by Julian Baker and Felix Baker, holds the most valuable position in Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN). Baker Bros. Advisors has a $801.8 million position in the stock, comprising 7.3% of its 13F portfolio. Coming in second is Samuel Isaly’s OrbiMed Advisors, with a $323.3 million position; the fund has 3.7% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish comprise Israel Englander’s Millennium Management, Arthur B Cohen and Joseph Healey’s Healthcor Management LP, and Steve Cohen’s Point72 Asset Management.

Due to the fact that Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedge funds who were dropping their positions entirely in the third quarter. Interestingly, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $29.3 million in stock. Malcolm Fairbairn’s fund, Ascend Capital, also dropped its stock, about $24.4 million worth.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) but similarly valued. We will take a look at O’Reilly Automotive Inc (NASDAQ:ORLY), Applied Materials, Inc. (NASDAQ:AMAT), Prologis Inc (NYSE:PLD), and V.F. Corporation (NYSE:VFC). This group of stocks’ market valuations are similar to ALXN’s market valuation.

As you can see these stocks had an average of 35 investors holding bullish positions at the end of the third quarter and the average amount invested in these stocks was $1.33 billion, which is lower than the $2.11 billion in ALXN’s case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table, while Prologis Inc (NYSE:PLD) is the least popular one with only 17 funds reporting ownership. 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. In this regard, Applied Materials, Inc. (NASDAQ:AMAT) might be a better candidate to consider a long position in.

Disclosure: None