Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
Is argenx SE (NASDAQ:ARGX) the right investment to pursue these days? The best stock pickers are becoming less confident. The number of long hedge fund bets retreated by 3 lately. Our calculations also showed that argx isn't among the 30 most popular stocks among hedge funds. ARGX was in 24 hedge funds' portfolios at the end of March. There were 27 hedge funds in our database with ARGX positions at the end of the previous quarter.
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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to go over the key hedge fund action surrounding argenx SE (NASDAQ:ARGX).
How have hedgies been trading argenx SE (NASDAQ:ARGX)?
Heading into the second quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in ARGX a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in argenx SE (NASDAQ:ARGX) was held by Baker Bros. Advisors, which reported holding $127.3 million worth of stock at the end of March. It was followed by Redmile Group with a $127.2 million position. Other investors bullish on the company included venBio Select Advisor, EcoR1 Capital, and Deerfield Management.
Judging by the fact that argenx SE (NASDAQ:ARGX) has faced declining sentiment from the aggregate hedge fund industry, it's safe to say that there is a sect of hedge funds that slashed their positions entirely by the end of the third quarter. At the top of the heap, Joseph Edelman's Perceptive Advisors said goodbye to the biggest position of all the hedgies monitored by Insider Monkey, totaling close to $53.9 million in stock, and Christopher James's Partner Fund Management was right behind this move, as the fund said goodbye to about $11.3 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as argenx SE (NASDAQ:ARGX) but similarly valued. These stocks are Integra Lifesciences Holdings Corp (NASDAQ:IART), The Howard Hughes Corporation (NYSE:HHC), Ascendis Pharma A/S (NASDAQ:ASND), and DCP Midstream LP (NYSE:DCP). All of these stocks' market caps are similar to ARGX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IART,19,159928,1 HHC,22,471962,-4 ASND,35,2904435,9 DCP,2,8323,-3 Average,19.5,886162,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $886 million. That figure was $751 million in ARGX's case. Ascendis Pharma A/S (NASDAQ:ASND) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 2 bullish hedge fund positions. argenx SE (NASDAQ:ARGX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ARGX as the stock returned 2.6% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
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