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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Ardelyx Inc (NASDAQ:ARDX).
Ardelyx Inc (NASDAQ:ARDX) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistic is 25. ARDX shareholders have witnessed an increase in enthusiasm from smart money lately. There were 17 hedge funds in our database with ARDX holdings at the end of March. Our calculations also showed that ARDX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Kolchinsky of RA Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to take a peek at the fresh hedge fund action regarding Ardelyx Inc (NASDAQ:ARDX).
Do Hedge Funds Think ARDX Is A Good Stock To Buy Now?
At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in ARDX a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, RA Capital Management held the most valuable stake in Ardelyx Inc (NASDAQ:ARDX), which was worth $46.1 million at the end of the second quarter. On the second spot was Rock Springs Capital Management which amassed $39.8 million worth of shares. Deerfield Management, Redmile Group, and Marshall Wace LLP 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 Sio Capital allocated the biggest weight to Ardelyx Inc (NASDAQ:ARDX), around 0.99% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 0.79 percent of its 13F equity portfolio to ARDX.
Consequently, key money managers were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the biggest position in Ardelyx Inc (NASDAQ:ARDX). Marshall Wace LLP had $25.4 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also initiated a $15.3 million position during the quarter. The following funds were also among the new ARDX investors: Nathaniel August's Mangrove Partners, Warren Lammert's Granite Point Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's check out 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 Kopin Corporation (NASDAQ:KOPN), Chuy's Holdings Inc (NASDAQ:CHUY), Fossil Group Inc (NASDAQ:FOSL), Great Southern Bancorp, Inc. (NASDAQ:GSBC), Asensus Surgical, Inc. (NYSE:ASXC), Zepp Health Corporation (NYSE:ZEPP), and Curis, Inc. (NASDAQ:CRIS). 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 KOPN,9,11475,-2 CHUY,10,36211,2 FOSL,16,115768,0 GSBC,9,26822,-1 ASXC,6,3782,-2 ZEPP,2,582,-3 CRIS,24,314270,-5 Average,10.9,72701,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $241 million in ARDX's case. Curis, Inc. (NASDAQ:CRIS) is the most popular stock in this table. On the other hand Zepp Health Corporation (NYSE:ZEPP) is the least popular one with only 2 bullish hedge fund positions. Ardelyx Inc (NASDAQ:ARDX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARDX is 72.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately ARDX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ARDX were disappointed as the stock returned -85% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.