Was The Smart Money Right About Loading Up On Repligen Corporation (RGEN)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Repligen Corporation (NASDAQ:RGEN).

Is Repligen Corporation (NASDAQ:RGEN) worth your attention right now? Investors who are in the know were becoming more confident. The number of long hedge fund bets advanced by 13 recently. Repligen Corporation (NASDAQ:RGEN) was in 34 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RGEN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 21 hedge funds in our database with RGEN holdings at the end of March.

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a look at the latest hedge fund action surrounding Repligen Corporation (NASDAQ:RGEN).

What does smart money think about Repligen Corporation (NASDAQ:RGEN)?

Heading into the third quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 62% from the first quarter of 2020. On the other hand, there were a total of 22 hedge funds with a bullish position in RGEN 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.

The largest stake in Repligen Corporation (NASDAQ:RGEN) was held by 12 West Capital Management, which reported holding $136.3 million worth of stock at the end of June. It was followed by Select Equity Group with a $128.3 million position. Other investors bullish on the company included Renaissance Technologies, Marshall Wace LLP, and Point72 Asset Management. In terms of the portfolio weights assigned to each position 12 West Capital Management allocated the biggest weight to Repligen Corporation (NASDAQ:RGEN), around 7.04% of its 13F portfolio. Miura Global Management is also relatively very bullish on the stock, designating 2.19 percent of its 13F equity portfolio to RGEN.

Now, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, initiated the most outsized position in Repligen Corporation (NASDAQ:RGEN). Millennium Management had $38.3 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $13 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Michael Gelband’s ExodusPoint Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Repligen Corporation (NASDAQ:RGEN) but similarly valued. These stocks are GrubHub Inc (NYSE:GRUB), Federal Realty Investment Trust (NYSE:FRT), Plains All American Pipeline, L.P. (NYSE:PAA), Amedisys Inc (NASDAQ:AMED), Penumbra Inc (NYSE:PEN), Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), and United Microelectronics Corp (NYSE:UMC). This group of stocks’ market caps are similar to RGEN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $307 million. That figure was $689 million in RGEN’s case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 9 bullish hedge fund positions. Repligen Corporation (NASDAQ:RGEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RGEN is 69.1. 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. 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on RGEN as the stock returned 34.8% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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