We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of argenx SE (NASDAQ:ARGX).
argenx SE (NASDAQ:ARGX) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2019. At the end of this article we will also compare ARGX to other stocks including Elbit Systems Ltd. (NASDAQ:ESLT), Encompass Health Corporation (NYSE:EHC), and Prosperity Bancshares, Inc. (NYSE:PB) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Felix Baker of Baker Bros.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the new hedge fund action encompassing argenx SE (NASDAQ:ARGX).
What does smart money think about argenx SE (NASDAQ:ARGX)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. On the other hand, there were a total of 27 hedge funds with a bullish position in ARGX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Redmile Group held the most valuable stake in argenx SE (NASDAQ:ARGX), which was worth $185.1 million at the end of the third quarter. On the second spot was Baker Bros. Advisors which amassed $163.7 million worth of shares. venBio Select Advisor, Driehaus Capital, 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 Redmile Group allocated the biggest weight to argenx SE (NASDAQ:ARGX), around 4.43% of its 13F portfolio. venBio Select Advisor is also relatively very bullish on the stock, designating 4.41 percent of its 13F equity portfolio to ARGX.
Seeing as argenx SE (NASDAQ:ARGX) has faced falling interest from the smart money, we can see that there is a sect of money managers that slashed their entire stakes last quarter. Intriguingly, Mark Kingdon’s Kingdon Capital dumped the largest stake of the 750 funds tracked by Insider Monkey, totaling close to $21 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $11.9 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as argenx SE (NASDAQ:ARGX) but similarly valued. These stocks are Elbit Systems Ltd. (NASDAQ:ESLT), Encompass Health Corporation (NYSE:EHC), Prosperity Bancshares, Inc. (NYSE:PB), and Ultrapar Participacoes SA (NYSE:UGP). This group of stocks’ market values match ARGX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ESLT | 3 | 12089 | 0 |
| EHC | 29 | 360336 | 4 |
| PB | 22 | 179901 | 4 |
| UGP | 5 | 70272 | 0 |
| Average | 14.75 | 155650 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $788 million in ARGX’s case. Encompass Health Corporation (NYSE:EHC) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. argenx SE (NASDAQ:ARGX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately ARGX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ARGX were disappointed as the stock returned -32.2% 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 many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
