The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Ardelyx Inc (NASDAQ:ARDX) and find out how it is affected by hedge funds’ moves.
Is Ardelyx Inc (NASDAQ:ARDX) ready to rally soon? Prominent investors are taking a pessimistic view. The number of long hedge fund positions shrunk by 3 lately. What might come as a surprise is the fact that the shares of Ardelyx Inc (NASDAQ:ARDX) were up 8.2% during the quarter. For a better explanation of the hedge fund behavior, we will cover hedge funds that held stake in the company at the end of September.
At the end of this article, we will also compare Ardelyx Inc (NASDAQ:ARDX) to other stocks including Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), NMI Holdings Inc (NASDAQ:NMIH), and Trevena Inc (NASDAQ:TRVN) to get a better sense of its popularity.
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In today’s marketplace, there are a lot of metrics shareholders can use to assess publicly traded companies. A couple of the best metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can outpace the broader indices by a superb margin (see the details here).
Keeping this in mind, let’s analyze the recent action encompassing Ardelyx Inc (NASDAQ:ARDX).
What does the smart money think about Ardelyx Inc (NASDAQ:ARDX)?
At the end of Q3, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decline of 30% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cormorant Asset Management, managed by Bihua Chen, holds the biggest position in Ardelyx Inc (NASDAQ:ARDX). Cormorant Asset Management has a $25.6 million position in the stock, comprising 4.1% of its 13F portfolio. On Cormorant Asset Management’s heels is RA Capital Management, led by Peter Kolchinsky, holding a $18.4 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish comprise Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Kevin Kotler’s Broadfin Capital, and Joseph Edelman’s Perceptive Advisors.
Judging by the fact that Ardelyx Inc (NASDAQ:ARDX) has faced a falling interest from hedge fund managers, logic holds that there were a few money managers that decided to sell off their full holdings last quarter. It’s worth mentioning that Herb Wagner’s FinePoint Capital dumped the biggest position of the 700 funds monitored by Insider Monkey, worth about $2.2 million in stock, and Hal Mintz’s Sabby Capital was right behind this move, as the fund cut about $0.2 million worth of shares. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Ardelyx Inc (NASDAQ:ARDX). These stocks are Altisource Portfolio Solutions S.A. (NASDAQ:ASPS), NMI Holdings Inc (NASDAQ:NMIH), Trevena Inc (NASDAQ:TRVN), and Sabine Royalty Trust (NYSE:SBR). This group of stocks’ market values are similar to Ardelyx Inc (NASDAQ:ARDX)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASPS | 12 | 107933 | -2 |
| NMIH | 24 | 235586 | 4 |
| TRVN | 19 | 79962 | 7 |
| SBR | 5 | 9749 | 0 |
As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $72 million in Ardelyx Inc (NASDAQ:ARDX)’s case. NMI Holdings Inc (NASDAQ:NMIH) is the most popular stock in this table. On the other hand, Sabine Royalty Trust (NYSE:SBR) is the least popular one with only 5 bullish hedge fund positions. Ardelyx Inc (NASDAQ:ARDX) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, NMI Holdings Inc (NASDAQ:NMIH) might be a better candidate to consider a long position.
