Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Ardelyx Inc (NASDAQ:ARDX) a good stock to buy? ARDX shareholders have witnessed an increase in support from the world’s most successful money managers lately. ARDX was in 13 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with ARDX holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Intellia Therapeutics Inc (NASDAQ:NTLA), National Presto Industries Inc. (NYSE:NPK), and TriCo Bancshares (NASDAQ:TCBK) to gather more data points.
Follow Ardelyx Inc. (NASDAQ:ARDX)
Follow Ardelyx Inc. (NASDAQ:ARDX)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to take a look at the latest action surrounding Ardelyx Inc (NASDAQ:ARDX).
What does the smart money think about Ardelyx Inc (NASDAQ:ARDX)?
Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in ARDX at the beginning of this year. As you can see from the graph below, hedge fund interest in the stock has been increasing pretty consistently over the last 5 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, RA Capital Management, led by Peter Kolchinsky, holds the largest position in Ardelyx Inc (NASDAQ:ARDX). RA Capital Management has a $42.3 million position in the stock, comprising 4.4% of its 13F portfolio. Sitting at the No. 2 spot is Bihua Chen of Cormorant Asset Management, with a $26.8 million position; the fund has 3% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Oleg Nodelman’s EcoR1 Capital and Joseph Edelman’s Perceptive Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now, specific money managers have jumped into Ardelyx Inc (NASDAQ:ARDX) headfirst. EcoR1 Capital assembled the most valuable position in Ardelyx Inc (NASDAQ:ARDX). EcoR1 Capital had $17 million invested in the company at the end of the quarter. Millennium Management, one of the 10 largest hedge funds in the world, also made a $4 million investment in the stock during the quarter. The other funds with brand new ARDX positions are Jim Simons’s Renaissance Technologies, Chuck Royce’s Royce & Associates, and Ken Griffin’s Citadel Investment Group.
Let’s now take a look at hedge fund activity in other stocks similar to Ardelyx Inc (NASDAQ:ARDX). These stocks are Intellia Therapeutics Inc (NASDAQ:NTLA), National Presto Industries Inc. (NYSE:NPK), TriCo Bancshares (NASDAQ:TCBK), and Green Plains Partners LP (NASDAQ:GPP). All of these stocks’ market caps match ARDX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTLA | 9 | 74463 | 1 |
| NPK | 12 | 80818 | -1 |
| TCBK | 7 | 27881 | 1 |
| GPP | 5 | 83207 | 0 |
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $142 million in ARDX’s case. National Presto Industries Inc. (NYSE:NPK) is the most popular stock in this table. On the other hand Green Plains Partners LP (NASDAQ:GPP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Ardelyx Inc (NASDAQ:ARDX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
