The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Amgen, Inc. (NASDAQ:AMGN) from the perspective of those elite funds.
Hedge fund interest in Amgen, Inc. (NASDAQ:AMGN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare AMGN to other stocks including Honeywell International Inc. (NYSE:HON), Accenture Plc (NYSE:ACN), and United Technologies Corporation (NYSE:UTX) to get a better sense of its popularity.
In today’s marketplace there are numerous signals stock market investors employ to appraise publicly traded companies. A duo of the most innovative signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the top picks of the elite money managers can outclass the S&P 500 by a very impressive amount (see the details here).
Cliff Asness of AQR Capital Management
Let’s take a peek at the new hedge fund action regarding Amgen, Inc. (NASDAQ:AMGN).
How are hedge funds trading Amgen, Inc. (NASDAQ:AMGN)?
At Q1’s end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 44 hedge funds held shares or bullish call options in AMGN a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Amgen, Inc. (NASDAQ:AMGN), which was worth $666.6 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $524.9 million worth of shares. Moreover, Two Sigma Advisors, D E Shaw, and Arrowstreet Capital were also bullish on Amgen, Inc. (NASDAQ:AMGN), allocating a large percentage of their portfolios to this stock.
Because Amgen, Inc. (NASDAQ:AMGN) has witnessed falling interest from the smart money, logic holds that there is a sect of hedgies that slashed their positions entirely last quarter. Interestingly, William B. Gray’s Orbis Investment Management dumped the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $49 million in stock, and Brian Ashford-Russell and Tim Woolley’s Polar Capital was right behind this move, as the fund cut about $19.7 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Amgen, Inc. (NASDAQ:AMGN). We will take a look at Honeywell International Inc. (NYSE:HON), Accenture Plc (NYSE:ACN), United Technologies Corporation (NYSE:UTX), and Sanofi (NASDAQ:SNY). This group of stocks’ market values match AMGN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HON | 56 | 2984847 | -1 |
| ACN | 40 | 976533 | 6 |
| UTX | 59 | 6558837 | -5 |
| SNY | 26 | 860101 | 3 |
| Average | 45.25 | 2845080 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.25 hedge funds with bullish positions and the average amount invested in these stocks was $2845 million. That figure was $2983 million in AMGN’s case. United Technologies Corporation (NYSE:UTX) is the most popular stock in this table. On the other hand Sanofi (NASDAQ:SNY) is the least popular one with only 26 bullish hedge fund positions. Amgen, Inc. (NASDAQ:AMGN) 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 AMGN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AMGN were disappointed as the stock returned -10.3% 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.
