Were Hedge Funds Right About Biogen Inc. (BIIB)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Biogen Inc. (NASDAQ:BIIB) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Biogen Inc. (NASDAQ:BIIB) has seen a decrease in support from the world’s most elite money managers lately. Biogen Inc. (NASDAQ:BIIB) was in 66 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 81. Our calculations also showed that BIIB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a peek at the latest hedge fund action regarding Biogen Inc. (NASDAQ:BIIB).

Alex Denner of Sarissa Capital Management

Do Hedge Funds Think BIIB Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -1% from the previous quarter. By comparison, 59 hedge funds held shares or bullish call options in BIIB a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Biogen Inc. (NASDAQ:BIIB), which was worth $277.8 million at the end of the third quarter. On the second spot was Sarissa Capital Management which amassed $182 million worth of shares. Citadel Investment Group, Healthcor Management LP, and D E Shaw 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 Sarissa Capital Management allocated the biggest weight to Biogen Inc. (NASDAQ:BIIB), around 14.28% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, designating 6.18 percent of its 13F equity portfolio to BIIB.

Due to the fact that Biogen Inc. (NASDAQ:BIIB) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedge funds who sold off their positions entirely in the third quarter. It’s worth mentioning that Brandon Haley’s Holocene Advisors said goodbye to the largest position of the 750 funds watched by Insider Monkey, valued at about $45.9 million in stock, and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management was right behind this move, as the fund sold off about $39.3 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Biogen Inc. (NASDAQ:BIIB). These stocks are O’Reilly Automotive Inc (NASDAQ:ORLY), Cadence Design Systems Inc (NASDAQ:CDNS), Roku, Inc. (NASDAQ:ROKU), Schlumberger Limited. (NYSE:SLB), Lucid Group Inc. (NASDAQ:LCID), Trane Technologies plc (NYSE:TT), and Digital Realty Trust, Inc. (NYSE:DLR). This group of stocks’ market valuations are closest to BIIB’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $1420 million. That figure was $1924 million in BIIB’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand Lucid Group Inc. (NASDAQ:LCID) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Biogen Inc. (NASDAQ:BIIB) is more popular among hedge funds. Our overall hedge fund sentiment score for BIIB is 78.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, BIIB wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BIIB were disappointed as the stock returned -20.1% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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