Are Hedge Funds Right About Jazz Pharmaceuticals?

Nina Todic

Thu, Apr 18, 2019, 6:05 PM

How do we determine whether Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Is Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) going to take off soon? Investors who are in the know are buying. The number of long hedge fund bets advanced by 2 recently. Our calculations also showed that JAZZ isn't among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Let's check out the fresh hedge fund action encompassing Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ).

How have hedgies been trading Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ)?

At Q4's end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JAZZ over the last 14 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Jim Simons's Renaissance Technologies has the most valuable position in Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ), worth close to $142.6 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Viking Global, managed by Andreas Halvorsen, which holds a $113.7 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish contain Cliff Asness's AQR Capital Management, Doug Silverman and Alexander Klabin's Senator Investment Group and Ken Heebner's Capital Growth Management.

As one would reasonably expect, some big names have jumped into Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) headfirst. Capital Growth Management created the most outsized position in Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ). Capital Growth Management had $40.9 million invested in the company at the end of the quarter. Eric Bannasch's Cadian Capital also made a $12.4 million investment in the stock during the quarter. The other funds with brand new JAZZ positions are Paul Tudor Jones's Tudor Investment Corp, Paul Marshall and Ian Wace's Marshall Wace LLP, and Jeffrey Talpins's Element Capital Management.

Let's now review hedge fund activity in other stocks similar to Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ). We will take a look at Teledyne Technologies Incorporated (NYSE:TDY), Nutanix, Inc. (NASDAQ:NTNX), China Southern Airlines Co Ltd (NYSE:ZNH), and Ionis Pharmaceuticals, Inc. (NASDAQ:IONS). This group of stocks' market caps are similar to JAZZ's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TDY,20,480161,1 NTNX,37,550381,-2 ZNH,4,14176,-1 IONS,21,140938,-1 Average,20.5,296414,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $597 million in JAZZ's case. Nutanix, Inc. (NASDAQ:NTNX) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 4 bullish hedge fund positions. Jazz Pharmaceuticals Public Limited Company (NASDAQ:JAZZ) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately JAZZ wasn't in this group. Hedge funds that bet on JAZZ were disappointed as the stock returned 15.8% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.

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

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