Hedge Funds Have Never Been This Bullish On Vertex Pharmaceuticals Incorporated (VRTX)

·6 min read

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).

Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) investors should pay attention to an increase in enthusiasm from smart money in recent months. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) was in 68 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 56. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRTX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Cathie Wood ARK Investment Management
Cathie Wood ARK Investment Management

Cathie Wood of ARK Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. 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. Keeping this in mind we're going to take a look at the key hedge fund action surrounding Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).

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

At Q1's end, a total of 68 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from one quarter earlier. On the other hand, there were a total of 56 hedge funds with a bullish position in VRTX a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), which was worth $515.8 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $369.4 million worth of shares. ARK Investment Management, Avoro Capital Advisors (venBio Select Advisor), and OrbiMed Advisors 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 Copernicus Capital Management allocated the biggest weight to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), around 10.42% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, setting aside 6.75 percent of its 13F equity portfolio to VRTX.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, initiated the biggest position in Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). Avoro Capital Advisors (venBio Select Advisor) had $300.8 million invested in the company at the end of the quarter. Steven Boyd's Armistice Capital also made a $84.2 million investment in the stock during the quarter. The other funds with brand new VRTX positions are Michael Rockefeller and KarláKroeker's Woodline Partners, Arthur B Cohen and Joseph Healey's Healthcor Management LP, and Anand Parekh's Alyeska Investment Group.

Let's now review hedge fund activity in other stocks similar to Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). We will take a look at NXP Semiconductors NV (NASDAQ:NXPI), Prudential Public Limited Company (NYSE:PUK), Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), Stellantis N.V. (NYSE:STLA), ICICI Bank Limited (NYSE:IBN), UBS Group AG (NYSE:UBS), and Eaton Corporation plc (NYSE:ETN). This group of stocks' market valuations resemble VRTX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NXPI,53,1718673,-13 PUK,2,4640,0 PBR,27,878461,3 STLA,21,751799,6 IBN,31,1903240,2 UBS,16,342177,-2 ETN,49,1094688,8 Average,28.4,956240,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $956 million. That figure was $3712 million in VRTX's case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is more popular among hedge funds. Our overall hedge fund sentiment score for VRTX is 90. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately VRTX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on VRTX were disappointed as the stock returned -10.2% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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