We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Horizon Pharma Public Limited Company (NASDAQ:HZNP) based on those filings.
Hedge fund interest in Horizon Pharma Public Limited Company (NASDAQ:HZNP) shares was flat at the end of last quarter. This is usually a negative indicator. 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 in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as AECOM (NYSE:ACM), Columbia Sportswear Company (NASDAQ:COLM), and Skechers USA Inc (NYSE:SKX) to gather more data points. Our calculations also showed that HZNP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
John Paulson of Paulson & Co
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. Now let’s analyze the recent hedge fund action encompassing Horizon Pharma Public Limited Company (NASDAQ:HZNP).
What have hedge funds been doing with Horizon Pharma Public Limited Company (NASDAQ:HZNP)?
Heading into the first quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in HZNP a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Horizon Pharma Public Limited Company (NASDAQ:HZNP), which was worth $365.6 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $295.8 million worth of shares. D E Shaw, Deerfield Management, and venBio Select Advisor 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 Scopia Capital allocated the biggest weight to Horizon Pharma Public Limited Company (NASDAQ:HZNP), around 7.09% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, designating 6.38 percent of its 13F equity portfolio to HZNP.
Due to the fact that Horizon Pharma Public Limited Company (NASDAQ:HZNP) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of fund managers that elected to cut their positions entirely last quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP said goodbye to the biggest stake of the 750 funds followed by Insider Monkey, totaling about $71.6 million in stock. Nick Niell’s fund, Arrowgrass Capital Partners, also sold off its stock, about $9.5 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to Horizon Pharma Public Limited Company (NASDAQ:HZNP). These stocks are AECOM (NYSE:ACM), Columbia Sportswear Company (NASDAQ:COLM), Skechers USA Inc (NYSE:SKX), and Grupo Televisa SAB (NYSE:TV). This group of stocks’ market caps match HZNP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACM | 36 | 1125310 | 9 |
| COLM | 23 | 135440 | -6 |
| SKX | 30 | 653184 | 2 |
| TV | 19 | 995016 | 4 |
| Average | 27 | 727238 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $727 million. That figure was $1860 million in HZNP’s case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Grupo Televisa SAB (NYSE:TV) is the least popular one with only 19 bullish hedge fund positions. Horizon Pharma Public Limited Company (NASDAQ:HZNP) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately HZNP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HZNP were disappointed as the stock returned -27.7% during the same time 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
