AGN lost its shine today

Allergan, the most popular stock among hedge funds on hedgemind.com, suffered a 15% loss after Secretary Lew 's announcement on tax inversions. It is now one more example of overcrowded stock that are doing serious damaging to hedge funds' money making skills after SUNE & VRX have already done so.

Nearly 28% of hedge funds, many of "who is who" of smart money, have a stake as of 12/31/15. Among them 13 hedge funds only just got in during Q4 2015 and bought it as a top 10 holding in their portfolio (see picture). Early buyers before 2015 may still have gains left even after today's big loss or 30% loss since last summer if they exit today. But for many unlucky ones who bought it during 2015 and still holding it, a loss is in the card, just how much they can stop.

Billionaire Andreas Halvorsen & John Paulson have been the top holders, each w/ 5+ mln shares held as of Q4 2015. They both sold 18%+ of their stakes during Q4 2015. But still their holding are significant should they still hold it as of today, the loss is YTD already 25%, ~$380+ mln. But more damages is really to smaller hedge funds w/ concentrated bet like tiger seed Nehal Chopra who were holding 27% her portfolio in this stock alone.

"Cut your losses short" is probably the time for hedge funds to apply this rule of thumb now.

What could we learn from this? When it is too crowded on one side, something will go wrong eventually. Don't overstay your welcome even when time is really good.