Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 mid-cap stocks among the best performing hedge funds in our database yielded an average return of 18% during the last 12 months, outperforming the S&P 500 Index funds by double digits. Although the elite funds occasionally have their duds, such as SunEdison and Valeant, the hedge fund picks seem to work on average. In the following paragraphs, we will find out what the billionaire investors and hedge funds think of Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shareholders have witnessed a decrease in hedge fund sentiment of late. More specifically, between July and September, the number of funds from our database long the stock declined to 58 from 60. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost or drop in popularity but it may still be less or more popular than similarly-priced stocks. That’s why at the end of this article we will examine companies such as Leggett & Platt, Inc. (NYSE:LEG), Gildan Activewear Inc (USA) (NYSE:GIL), and Fluor Corporation (NEW) (NYSE:FLR) to gather more data points.
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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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Keeping this in mind, we’re going to view the new action regarding Valeant Pharmaceuticals Intl Inc (NYSE:VRX).
How are hedge funds trading Valeant Pharmaceuticals Intl Inc (NYSE:VRX)?
As mentioned at the beginning of this article, heading into the fourth quarter of 2016, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, down by 3% over the quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Bill Ackman’s Pershing Square has the most valuable position in Valeant Pharmaceuticals Intl Inc (NYSE:VRX), worth close to $530.1 million, corresponding to 9.8% of its total 13F portfolio. On Pershing Square’s heels is Paulson & Co, led by John Paulson, holding a $463.3 million position; 5% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish contain Jeffrey Ubben’s ValueAct Capital, Zach Schreiber’s Point State Capital and Steve Cohen’s Point72 Asset Management.
Due to the fact that Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds that elected to cut their positions entirely in the third quarter. At the top of the heap, Lou Simpson’s SQ Advisors dropped the biggest investment of the 700 funds watched by Insider Monkey, totaling close to $48.9 million in call options., and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund sold off about $36.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Valeant Pharmaceuticals Intl Inc (NYSE:VRX) but similarly valued. We will take a look at Leggett & Platt, Inc. (NYSE:LEG), Gildan Activewear Inc (USA) (NYSE:GIL), Fluor Corporation (NEW) (NYSE:FLR), and The Goodyear Tire & Rubber Company (NASDAQ:GT). This group of stocks’ market caps resemble VRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LEG | 21 | 123384 | 6 |
| GIL | 10 | 84775 | -3 |
| FLR | 24 | 226331 | -2 |
| GT | 38 | 1712422 | 4 |
As you can see these stocks had an average of 23 funds with bullish positions and the average amount invested in these stocks was $537 million. That figure was $2.81 billion in VRX’s case. The Goodyear Tire & Rubber Company (NASDAQ:GT) is the most popular stock in this table. On the other hand, Gildan Activewear Inc (USA) (NYSE:GIL) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
