Hedge Funds Have Never Been This Bullish On Amarin Corporation plc (AMRN)

Nina Todic

Wed, Jun 19, 2019, 6:11 PM

"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Amarin Corporation plc (NASDAQ:AMRN).

Amarin Corporation plc (NASDAQ:AMRN) was in 26 hedge funds' portfolios at the end of March. AMRN has experienced an increase in enthusiasm from smart money lately. There were 24 hedge funds in our database with AMRN holdings at the end of the previous quarter. Our calculations also showed that amrn isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

We're going to review the recent hedge fund action surrounding Amarin Corporation plc (NASDAQ:AMRN).

How have hedgies been trading Amarin Corporation plc (NASDAQ:AMRN)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMRN over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Baker Bros. Advisors held the most valuable stake in Amarin Corporation plc (NASDAQ:AMRN), which was worth $897 million at the end of the first quarter. On the second spot was Consonance Capital Management which amassed $228.2 million worth of shares. Moreover, venBio Select Advisor, Perceptive Advisors, and Rock Springs Capital Management were also bullish on Amarin Corporation plc (NASDAQ:AMRN), allocating a large percentage of their portfolios to this stock.

Consequently, key hedge funds have jumped into Amarin Corporation plc (NASDAQ:AMRN) headfirst. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the most outsized position in Amarin Corporation plc (NASDAQ:AMRN). Polar Capital had $9.3 million invested in the company at the end of the quarter. Samuel Isaly's OrbiMed Advisors also made a $7.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith's Laurion Capital Management, Clint Carlson's Carlson Capital, and Ori Hershkovitz's Nexthera Capital.

Let's now take a look at hedge fund activity in other stocks similar to Amarin Corporation plc (NASDAQ:AMRN). We will take a look at Moderna, Inc. (NASDAQ:MRNA), Zayo Group Holdings Inc (NYSE:ZAYO), Genpact Limited (NYSE:G), and AerCap Holdings N.V. (NYSE:AER). This group of stocks' market valuations are closest to AMRN's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRNA,15,492608,-2 ZAYO,61,1681079,5 G,29,600991,7 AER,23,792415,-8 Average,32,891773,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $892 million. That figure was $1959 million in AMRN's case. Zayo Group Holdings Inc (NYSE:ZAYO) is the most popular stock in this table. On the other hand Moderna, Inc. (NASDAQ:MRNA) is the least popular one with only 15 bullish hedge fund positions. Amarin Corporation plc (NASDAQ:AMRN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AMRN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); AMRN investors were disappointed as the stock returned -12% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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