Is Ardelyx Inc (NASDAQ:ARDX) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the recent hedge fund action encompassing Ardelyx Inc (NASDAQ:ARDX).
Hedge fund activity in Ardelyx Inc (NASDAQ:ARDX)
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARDX over the last 13 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Phill Gross and Robert Atchinson's Adage Capital Management has the largest position in Ardelyx Inc (NASDAQ:ARDX), worth close to $15.2 million, comprising less than 0.1%% of its total 13F portfolio. On Adage Capital Management's heels is Deerfield Management, led by James E. Flynn, holding a $15.2 million position; 0.5% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism contain Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management, Jim Simons's Renaissance Technologies and Ari Zweiman's 683 Capital Partners.
Judging by the fact that Ardelyx Inc (NASDAQ:ARDX) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies that elected to cut their full holdings in the third quarter. At the top of the heap, Anand Parekh's Alyeska Investment Group said goodbye to the biggest stake of the 700 funds tracked by Insider Monkey, worth an estimated $0.5 million in stock, and Efrem Kamen's Pura Vida Investments was right behind this move, as the fund dropped about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Ardelyx Inc (NASDAQ:ARDX) but similarly valued. We will take a look at Bellicum Pharmaceuticals Inc (NASDAQ:BLCM), DSP Group, Inc. (NASDAQ:DSPG), IMV Inc. (NASDAQ:IMV), and EyePoint Pharmaceuticals, Inc. (NASDAQ:EYPT). This group of stocks' market valuations resemble ARDX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLCM,9,41791,0 DSPG,11,68273,1 IMV,1,158,0 EYPT,3,4067,0 Average,6,28572,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $61 million in ARDX's case. DSP Group, Inc. (NASDAQ:DSPG) is the most popular stock in this table. On the other hand IMV Inc. (NASDAQ:IMV) is the least popular one with only 1 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.
Disclosure: None. This article was originally published at Insider Monkey.