Was The Smart Money Right About Biogen Inc. (BIIB)?

This post was originally published on this site

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Biogen Inc. (NASDAQ:BIIB) to find out whether there were any major changes in hedge funds’ views.

Is Biogen Inc. (NASDAQ:BIIB) a bargain? Investors who are in the know were buying. The number of long hedge fund positions inched up by 4 lately. Biogen Inc. (NASDAQ:BIIB) was in 63 hedge funds’ portfolios at the end of December. 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 Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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 take a look at the key hedge fund action surrounding Biogen Inc. (NASDAQ:BIIB).

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

At fourth quarter’s end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 61 hedge funds with a bullish position in BIIB 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.

Among these funds, Renaissance Technologies held the most valuable stake in Biogen Inc. (NASDAQ:BIIB), which was worth $743.8 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $245.5 million worth of shares. D E Shaw, Berkshire Hathaway, and Sarissa 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 Sarissa Capital Management allocated the biggest weight to Biogen Inc. (NASDAQ:BIIB), around 16.07% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, earmarking 5.49 percent of its 13F equity portfolio to BIIB.

Now, key money managers were breaking ground themselves. Deerfield Management, managed by James E. Flynn, created the most valuable position in Biogen Inc. (NASDAQ:BIIB). Deerfield Management had $109.7 million invested in the company at the end of the quarter.  Palo Alto Investors also made a $57.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Stephen DuBois’s Camber Capital Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and  Farallon Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Biogen Inc. (NASDAQ:BIIB) but similarly valued. We will take a look at The Trade Desk, Inc. (NASDAQ:TTD), The Bank of New York Mellon Corporation (NYSE:BK), Microchip Technology Incorporated (NASDAQ:MCHP), Cintas Corporation (NASDAQ:CTAS), Chewy, Inc. (NYSE:CHWY), MSCI Inc (NYSE:MSCI), and Brown-Forman Corporation (NYSE:BF). This group of stocks’ market caps match BIIB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TTD 35 1195309 12
BK 47 4689872 -1
MCHP 45 961474 10
CTAS 36 746276 -2
CHWY 38 728528 -8
MSCI 41 984592 -6
BF 29 1575074 -3
Average 38.7 1554446 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.7 hedge funds with bullish positions and the average amount invested in these stocks was $1554 million. That figure was $2753 million in BIIB’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 29 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 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately BIIB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BIIB were disappointed as the stock returned 9.2% since the end of the fourth quarter (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

Follow Biogen Inc. (NASDAQ:BIIB)

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