Were Hedge Funds Right About Crowding Into Horizon Therapeutics (HZNP)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Horizon Therapeutics Public Limited Company (NASDAQ:HZNP).

Is Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) worth your attention right now? The best stock pickers were turning bullish. The number of bullish hedge fund bets increased by 4 in recent months. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) was in 45 hedge funds’ portfolios at the end of June. The all time high for this statistics is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that HZNP 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 41 hedge funds in our database with HZNP positions at the end of the first quarter.

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

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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.

Kamran Moghtaderi of Eversept Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. 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. Keeping this in mind we’re going to go over the latest hedge fund action surrounding Horizon Therapeutics Public Limited Company (NASDAQ:HZNP).

What have hedge funds been doing with Horizon Therapeutics Public Limited Company (NASDAQ:HZNP)?

At the end of the second quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in HZNP a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), with a stake worth $573.2 million reported as of the end of September. Trailing Renaissance Technologies was Paulson & Co, which amassed a stake valued at $383 million. Avoro Capital Advisors (venBio Select Advisor), Citadel Investment Group, and Adage Capital Management 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 Paulson & Co allocated the biggest weight to Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), around 12.24% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, designating 8.57 percent of its 13F equity portfolio to HZNP.

As aggregate interest increased, some big names were leading the bulls’ herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most valuable position in Horizon Therapeutics Public Limited Company (NASDAQ:HZNP). Adage Capital Management had $181 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also initiated a $63.5 million position during the quarter. The other funds with brand new HZNP positions are Kamran Moghtaderi’s Eversept Partners, Israel Englander’s Millennium Management, and Brad Farber’s Atika Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) but similarly valued. We will take a look at ABIOMED, Inc. (NASDAQ:ABMD), Pool Corporation (NASDAQ:POOL), KB Financial Group, Inc. (NYSE:KB), Alteryx, Inc. (NYSE:AYX), Gartner Inc (NYSE:IT), Trimble Inc. (NASDAQ:TRMB), and VICI Properties Inc. (NYSE:VICI). This group of stocks’ market caps are closest to HZNP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $974 million. That figure was $2955 million in HZNP’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 6 bullish hedge fund positions. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HZNP is 82.3. 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 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on HZNP as the stock returned 39.3% since the end of Q2 (through 10/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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