Were Hedge Funds Right About Horizon Therapeutics (HZNP)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Horizon Therapeutics Public Limited Company (NASDAQ:HZNP).

Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) was in 56 hedge funds’ portfolios at the end of June. The all time high for this statistic is 61. HZNP has experienced an increase in enthusiasm from smart money of late. There were 48 hedge funds in our database with HZNP positions at the end of the first quarter. Our calculations also showed that HZNP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Kamran Moghtaderi of Eversept Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. 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 homepage. Now we’re going to review the key hedge fund action regarding Horizon Therapeutics Public Limited Company (NASDAQ:HZNP).

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

At second quarter’s end, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. By comparison, 45 hedge funds held shares or bullish call options in HZNP a year ago. With hedge funds’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Avoro Capital Advisors (venBio Select Advisor) held the most valuable stake in Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), which was worth $842.8 million at the end of the second quarter. On the second spot was Paulson & Co which amassed $748.3 million worth of shares. Renaissance Technologies, OrbiMed Advisors, 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 17.88% of its 13F portfolio. Avoro Capital Advisors (venBio Select Advisor) is also relatively very bullish on the stock, dishing out 14.66 percent of its 13F equity portfolio to HZNP.

As one would reasonably expect, key money managers have jumped into Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) headfirst. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized position in Horizon Therapeutics Public Limited Company (NASDAQ:HZNP). Point72 Asset Management had $98.9 million invested in the company at the end of the quarter. Farallon Capital also made a $46.8 million investment in the stock during the quarter. The other funds with brand new HZNP positions are Zach Schreiber’s Point State Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Kamran Moghtaderi’s Eversept Partners.

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. These stocks are CarMax Inc (NYSE:KMX), TransUnion (NYSE:TRU), DraftKings Inc. (NASDAQ:DKNG), MGM Resorts International (NYSE:MGM), Church & Dwight Co., Inc. (NYSE:CHD), Gartner Inc (NYSE:IT), and Fortis Inc. (NYSE:FTS). This group of stocks’ market valuations are closest to HZNP’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.6 hedge funds with bullish positions and the average amount invested in these stocks was $1658 million. That figure was $4325 million in HZNP’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 9 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 84.5. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on HZNP as the stock returned 28.1% since the end of Q2 (through 10/29) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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