Should You Avoid Neurocrine Biosciences, Inc. (NBIX)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Neurocrine Biosciences, Inc. (NASDAQ:NBIX).

Neurocrine Biosciences, Inc. (NASDAQ:NBIX) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. NBIX was in 38 hedge funds’ portfolios at the end of March. There were 42 hedge funds in our database with NBIX holdings at the end of the previous quarter. Our calculations also showed that NBIX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 51 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Samuel Isaly of OrbiMed Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the fresh hedge fund action regarding Neurocrine Biosciences, Inc. (NASDAQ:NBIX).

How have hedgies been trading Neurocrine Biosciences, Inc. (NASDAQ:NBIX)?

At Q1’s end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NBIX over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Joseph Edelman’s Perceptive Advisors has the number one position in Neurocrine Biosciences, Inc. (NASDAQ:NBIX), worth close to $265.1 million, comprising 6.9% of its total 13F portfolio. Sitting at the No. 2 spot is Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, which holds a $134 million position; 5.7% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions include Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Julian Baker and Felix Baker’s Baker Bros. Advisors and Samuel Isaly’s OrbiMed Advisors. In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to Neurocrine Biosciences, Inc. (NASDAQ:NBIX), around 6.91% of its 13F portfolio. Healthcor Management LP is also relatively very bullish on the stock, earmarking 5.73 percent of its 13F equity portfolio to NBIX.

Seeing as Neurocrine Biosciences, Inc. (NASDAQ:NBIX) has faced a decline in interest from the smart money, logic holds that there is a sect of funds that decided to sell off their full holdings by the end of the third quarter. At the top of the heap, Xiuping Li’s Opti Capital Management dropped the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $15.4 million in stock. Michael Rockefeller and KarláKroeker’s fund, Woodline Partners, also cut its stock, about $7.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Neurocrine Biosciences, Inc. (NASDAQ:NBIX). These stocks are Trimble Inc. (NASDAQ:TRMB), ASE Technology Holding Co., Ltd. (NYSE:ASX), Alleghany Corporation (NYSE:Y), and Pool Corporation (NASDAQ:POOL). All of these stocks’ market caps are closest to NBIX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $1055 million in NBIX’s case. Pool Corporation (NASDAQ:POOL) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on NBIX as the stock returned 44.1% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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