Pharmaceuticals

Is Regeneron Pharmaceuticals (REGN) A Worthy Investment?

Oakmark Funds, an investment management firm, published its “Oakmark Select Fund” second quarter 2021 investor letter – a copy of which can be seen here. A return of 7.96% was reported by the fund in the Q2 of 2021, just behind the S&P 500 Index’s 8.6% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Oakmark Funds, the fund mentioned Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN), and discussed its stance on the firm. Regeneron Pharmaceuticals, Inc. is a Tarrytown, New York-based biotechnology company with a $71.7 billion market capitalization. REGN delivered a 38.85% return since the beginning of the year, while its 12-month returns are up by 11.32%. The stock closed at $665.77 per share on August 26, 2021.

Here is what Oakmark Funds has to say about Regeneron Pharmaceuticals, Inc. in its Q2 2021 investor letter:

“We restored Regeneron Pharmaceuticals from a rather trivial to a more normal position size. You may recall Regeneron performed well for the Fund during the Covid-19 crisis, so we significantly reduced our position as its price-value gap narrowed. During the past several quarters, however, the market has experienced the now infamous “reopening trade,” in which companies that performed well during the pandemic trailed as the economy reopened. Regeneron suffered a similar fate and its shares have lagged the S&P 500 by roughly 4000 basis points, despite the company’s strong fundamentals and robust pipeline of new products. The underperformance widened Regeneron’s price-value gap, so we restored it to a more normal position size.”

Based on our calculations, Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. REGN was in 48 hedge fund portfolios at the end of the first half of 2021, compared to 39 funds in the previous quarter. Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) delivered a 33.45% return in the past 3 months.

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’ 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 115 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.

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