Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Takeda Pharmaceutical Company Limited (NYSE:TAK) makes for a good investment right now.
Is Takeda Pharmaceutical Company Limited (NYSE:TAK) a healthy stock for your portfolio? Prominent investors are reducing their bets on the stock. The number of long hedge fund bets fell by 3 in recent months. Our calculations also showed that TAK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most traders, hedge funds are viewed as slow, outdated investment vehicles of yesteryear. While there are over 8000 funds trading today, Our experts choose to focus on the bigwigs of this club, about 850 funds. It is estimated that this group of investors handle the majority of the hedge fund industry’s total capital, and by keeping an eye on their first-class stock picks, Insider Monkey has formulated a few investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Larry Robbins of Glenview Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action encompassing Takeda Pharmaceutical Company Limited (NYSE:TAK).
How are hedge funds trading Takeda Pharmaceutical Company Limited (NYSE:TAK)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in TAK a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Glenview Capital held the most valuable stake in Takeda Pharmaceutical Company Limited (NYSE:TAK), which was worth $603.4 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $261.3 million worth of shares. GMT Capital, Renaissance Technologies, and LMR Partners 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 Ovata Capital Management allocated the biggest weight to Takeda Pharmaceutical Company Limited (NYSE:TAK), around 13.04% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, earmarking 5.64 percent of its 13F equity portfolio to TAK.
Seeing as Takeda Pharmaceutical Company Limited (NYSE:TAK) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies who sold off their entire stakes heading into Q4. Intriguingly, Seth Klarman’s Baupost Group dumped the largest investment of the 750 funds watched by Insider Monkey, worth about $162.3 million in stock. David Costen Haley’s fund, HBK Investments, also dumped its stock, about $45.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Takeda Pharmaceutical Company Limited (NYSE:TAK). We will take a look at Enterprise Products Partners L.P. (NYSE:EPD), Raytheon Company (NYSE:RTN), The Charles Schwab Corporation (NYSE:SCHW), and Brookfield Asset Management Inc. (NYSE:BAM). This group of stocks’ market caps resemble TAK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EPD | 28 | 340248 | 4 |
| RTN | 53 | 3458796 | -1 |
| SCHW | 70 | 4021282 | 11 |
| BAM | 34 | 1282206 | 2 |
| Average | 46.25 | 2275633 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $2276 million. That figure was $1186 million in TAK’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Enterprise Products Partners L.P. (NYSE:EPD) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Takeda Pharmaceutical Company Limited (NYSE:TAK) is even less popular than EPD. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on TAK, though not to the same extent, as the stock returned -13.1% during the same time period and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
