Is Amarin Corporation plc (AMRN) Going to Burn These Hedge Funds?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Amarin Corporation plc (NASDAQ:AMRN).

Is Amarin Corporation plc (NASDAQ:AMRN) worth your attention right now? The best stock pickers were selling. The number of long hedge fund positions shrunk by 2 in recent months. Amarin Corporation plc (NASDAQ:AMRN) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 39. Our calculations also showed that AMRN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 24 hedge funds in our database with AMRN positions at the end of the fourth quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to go over the new hedge fund action encompassing Amarin Corporation plc (NASDAQ:AMRN).

Do Hedge Funds Think AMRN Is A Good Stock To Buy Now?

At first quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 39 hedge funds with a bullish position in AMRN a year ago. 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, Baker Bros. Advisors was the largest shareholder of Amarin Corporation plc (NASDAQ:AMRN), with a stake worth $164.3 million reported as of the end of March. Trailing Baker Bros. Advisors was Eversept Partners, which amassed a stake valued at $104.9 million. Avoro Capital Advisors (venBio Select Advisor), Rock Springs Capital Management, and DG 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 Eversept Partners allocated the biggest weight to Amarin Corporation plc (NASDAQ:AMRN), around 8.31% of its 13F portfolio. DG Capital Management is also relatively very bullish on the stock, dishing out 4.71 percent of its 13F equity portfolio to AMRN.

Judging by the fact that Amarin Corporation plc (NASDAQ:AMRN) has faced falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies who were dropping their entire stakes last quarter. At the top of the heap, Ken Greenberg and David Kim’s Ghost Tree Capital dropped the largest position of all the hedgies watched by Insider Monkey, worth an estimated $2 million in stock, and Arthur B Cohen and Joseph Healey’s Healthcor Management LP was right behind this move, as the fund said goodbye to about $1.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Amarin Corporation plc (NASDAQ:AMRN) but similarly valued. These stocks are Gentherm Inc (NASDAQ:THRM), Essential Properties Realty Trust, Inc. (NYSE:EPRT), Shenandoah Telecommunications Company (NASDAQ:SHEN), Pactiv Evergreen Inc. (NASDAQ:PTVE), Tri Pointe Homes, Inc. (NYSE:TPH), Herman Miller, Inc. (NASDAQ:MLHR), and WesBanco, Inc. (NASDAQ:WSBC). All of these stocks’ market caps match AMRN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $444 million in AMRN’s case. Tri Pointe Homes, Inc. (NYSE:TPH) is the most popular stock in this table. On the other hand Essential Properties Realty Trust, Inc. (NYSE:EPRT) is the least popular one with only 5 bullish hedge fund positions. Amarin Corporation plc (NASDAQ:AMRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMRN is 60.4. 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. 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 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately AMRN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AMRN were disappointed as the stock returned -32.7% since the end of March (through 7/16) 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 many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.