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 September 30, so let’s proceed with the discussion of the hedge fund sentiment on Takeda Pharmaceutical Company Limited (NYSE:TAK).
Takeda Pharmaceutical Company Limited (NYSE:TAK) investors should be aware of an increase in enthusiasm from smart money of late. Takeda Pharmaceutical Company Limited (NYSE:TAK) was in 19 hedge funds' portfolios at the end of September. The all time high for this statistic is 35. There were 18 hedge funds in our database with TAK positions at the end of the second quarter. Our calculations also showed that TAK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
John Zaro of Bourgeon Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we're going to take a look at the fresh hedge fund action encompassing Takeda Pharmaceutical Company Limited (NYSE:TAK).
Do Hedge Funds Think TAK Is A Good Stock To Buy Now?
At third quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in TAK a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
The largest stake in Takeda Pharmaceutical Company Limited (NYSE:TAK) was held by Glenview Capital, which reported holding $299.5 million worth of stock at the end of September. It was followed by Paulson & Co with a $201.5 million position. Other investors bullish on the company included Renaissance Technologies, GMT Capital, and LMR Partners. In terms of the portfolio weights assigned to each position Glenview Capital allocated the biggest weight to Takeda Pharmaceutical Company Limited (NYSE:TAK), around 9.4% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, designating 6.28 percent of its 13F equity portfolio to TAK.
As one would reasonably expect, key hedge funds were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most outsized position in Takeda Pharmaceutical Company Limited (NYSE:TAK). Laurion Capital Management had $0.8 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also made a $0.6 million investment in the stock during the quarter. The only other fund with a new position in the stock is John Zaro's Bourgeon Capital.
Let's now take a look at hedge fund activity in other stocks similar to Takeda Pharmaceutical Company Limited (NYSE:TAK). These stocks are The Progressive Corporation (NYSE:PGR), Humana Inc (NYSE:HUM), Boston Scientific Corporation (NYSE:BSX), Norfolk Southern Corp. (NYSE:NSC), General Electric Company (NYSE:GE), Moody's Corporation (NYSE:MCO), and America Movil SAB de CV (NYSE:AMX). All of these stocks' market caps are closest to TAK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PGR,47,1692254,-3 HUM,61,4804339,-12 BSX,61,2536996,-5 NSC,47,715468,0 GE,45,2747958,-12 MCO,60,11434920,-1 AMX,15,132210,4 Average,48,3437735,-4.1 [/table]
As you can see these stocks had an average of 48 hedge funds with bullish positions and the average amount invested in these stocks was $3438 million. That figure was $734 million in TAK's case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 15 bullish hedge fund positions. Takeda Pharmaceutical Company Limited (NYSE:TAK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TAK is 26.6. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately TAK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TAK investors were disappointed as the stock returned 5.6% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
