Should I Buy Amgen, Inc. (AMGN)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Amgen, Inc. (NASDAQ:AMGN) changed recently.

Amgen, Inc. (NASDAQ:AMGN) shareholders have witnessed an increase in hedge fund sentiment recently. Amgen, Inc. (NASDAQ:AMGN) was in 53 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 73. There were 47 hedge funds in our database with AMGN positions at the end of the first quarter. Our calculations also showed that AMGN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now let’s take a gander at the fresh hedge fund action regarding Amgen, Inc. (NASDAQ:AMGN).

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

Heading into the third quarter of 2021, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMGN over the last 24 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Among these funds, Two Sigma Advisors held the most valuable stake in Amgen, Inc. (NASDAQ:AMGN), which was worth $312.1 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $291.4 million worth of shares. D E Shaw, Arrowstreet Capital, and Citadel Investment Group 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 L2 Asset Management allocated the biggest weight to Amgen, Inc. (NASDAQ:AMGN), around 2.27% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, earmarking 2.12 percent of its 13F equity portfolio to AMGN.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Amgen, Inc. (NASDAQ:AMGN). Arrowstreet Capital had $176.4 million invested in the company at the end of the quarter. Arthur B Cohen and Joseph Healey’s Healthcor Management LP also made a $38.6 million investment in the stock during the quarter. The following funds were also among the new AMGN investors: Larry Robbins’s Glenview Capital, Michael Castor’s Sio Capital, and Andrew Weiss’s Weiss Asset Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Amgen, Inc. (NASDAQ:AMGN) but similarly valued. We will take a look at The Charles Schwab Corporation (NYSE:SCHW), Lowe’s Companies, Inc. (NYSE:LOW), Rio Tinto Group (NYSE:RIO), HDFC Bank Limited (NYSE:HDB), Intuit Inc. (NASDAQ:INTU), BlackRock, Inc. (NYSE:BLK), and American Express Company (NYSE:AXP). All of these stocks’ market caps resemble AMGN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.4 hedge funds with bullish positions and the average amount invested in these stocks was $6900 million. That figure was $1652 million in AMGN’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Rio Tinto Group (NYSE:RIO) is the least popular one with only 21 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. Our overall hedge fund sentiment score for AMGN is 63.2. 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 22.9% in 2021 through October 1st and beat the market again by 5.6 percentage points. Unfortunately AMGN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AMGN were disappointed as the stock returned -11.6% since the end of June (through 10/1) 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.