We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ionis Pharmaceuticals, Inc. (NASDAQ:IONS).
Is Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) a bargain? Hedge funds are becoming hopeful. The number of long hedge fund positions advanced by 7 recently. Our calculations also showed that IONS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to take a glance at the latest hedge fund action regarding Ionis Pharmaceuticals, Inc. (NASDAQ:IONS).
What have hedge funds been doing with Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)?
At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 39% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in IONS 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.
The largest stake in Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) was held by Renaissance Technologies, which reported holding $108.6 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $96.7 million position. Other investors bullish on the company included Biotechnology Value Fund, D E Shaw, and Sabby Capital. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), around 9.81% of its 13F portfolio. Biotechnology Value Fund is also relatively very bullish on the stock, designating 5.89 percent of its 13F equity portfolio to IONS.
As aggregate interest increased, some big names were breaking ground themselves. Biotechnology Value Fund, managed by Mark Lampert, assembled the most valuable position in Ionis Pharmaceuticals, Inc. (NASDAQ:IONS). Biotechnology Value Fund had $56 million invested in the company at the end of the quarter. Jeffrey Jay and David Kroin’s Great Point Partners also initiated a $16.2 million position during the quarter. The following funds were also among the new IONS investors: Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) but similarly valued. We will take a look at Nordson Corporation (NASDAQ:NDSN), Aspen Technology, Inc. (NASDAQ:AZPN), Westlake Chemical Corporation (NYSE:WLK), and Cognex Corporation (NASDAQ:CGNX). All of these stocks’ market caps match IONS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NDSN | 15 | 43658 | -2 |
| AZPN | 28 | 1267011 | 2 |
| WLK | 18 | 352906 | -5 |
| CGNX | 18 | 179338 | 5 |
| Average | 19.75 | 460728 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $461 million. That figure was $379 million in IONS’s case. Aspen Technology, Inc. (NASDAQ:AZPN) is the most popular stock in this table. On the other hand Nordson Corporation (NASDAQ:NDSN) is the least popular one with only 15 bullish hedge fund positions. Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) 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. Unfortunately IONS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IONS were disappointed as the stock returned 11.7% in 2019 and trailed 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.
