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 (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).
Is Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) a splendid investment today? Prominent investors are buying. The number of bullish hedge fund bets improved by 3 in recent months. Our calculations also showed that VRTX 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).
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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
Now we’re going to take a peek at the key hedge fund action regarding Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).
What does smart money think about Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX)?
Heading into the first quarter of 2020, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the third quarter of 2019. By comparison, 39 hedge funds held shares or bullish call options in VRTX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), which was worth $1549.4 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $263.8 million worth of shares. Citadel Investment Group, Adage Capital Management, and OrbiMed Advisors 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 Copernicus Capital Management allocated the biggest weight to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), around 16.6% of its 13F portfolio. Melqart Asset Management is also relatively very bullish on the stock, designating 5.28 percent of its 13F equity portfolio to VRTX.
Consequently, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the biggest position in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). Balyasny Asset Management had $34.9 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also made a $12.5 million investment in the stock during the quarter. The following funds were also among the new VRTX investors: Greg Martinez’s Parkman Healthcare Partners, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) but similarly valued. These stocks are CSX Corporation (NASDAQ:CSX), Eni SpA (NYSE:E), Marsh & McLennan Companies, Inc. (NYSE:MMC), and Applied Materials, Inc. (NASDAQ:AMAT). All of these stocks’ market caps match VRTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSX | 46 | 2345719 | 5 |
| E | 6 | 45145 | 0 |
| MMC | 31 | 649419 | 3 |
| AMAT | 72 | 3452552 | 17 |
| Average | 38.75 | 1623209 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.75 hedge funds with bullish positions and the average amount invested in these stocks was $1623 million. That figure was $3272 million in VRTX’s case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 6 bullish hedge fund positions. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on VRTX as the stock returned 16.4% in 2020 (through May 1st) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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.
