Is Viking Therapeutics, Inc. (NASDAQ:VKTX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Viking Therapeutics, Inc. (NASDAQ:VKTX) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds' portfolios at the end of March. At the end of this article we will also compare VKTX to other stocks including Johnson Outdoors Inc. (NASDAQ:JOUT), Univest Financial Corporation (NASDAQ:UVSP), and Ituran Location and Control Ltd. (NASDAQ:ITRN) to get a better sense of its popularity.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's take a look at the recent hedge fund action encompassing Viking Therapeutics, Inc. (NASDAQ:VKTX).
How have hedgies been trading Viking Therapeutics, Inc. (NASDAQ:VKTX)?
Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards VKTX over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Viking Therapeutics, Inc. (NASDAQ:VKTX) was held by Park West Asset Management, which reported holding $15.6 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $10.7 million position. Other investors bullish on the company included Sio Capital, Rubric Capital Management, and Opaleye Management.
Since Viking Therapeutics, Inc. (NASDAQ:VKTX) has experienced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that slashed their positions entirely heading into Q3. At the top of the heap, Lawrence Hawkins's Prosight Capital dumped the largest position of all the hedgies tracked by Insider Monkey, comprising about $4.8 million in stock, and Chuck Royce's Royce & Associates was right behind this move, as the fund dropped about $1 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Viking Therapeutics, Inc. (NASDAQ:VKTX). These stocks are Johnson Outdoors Inc. (NASDAQ:JOUT), Univest Financial Corporation (NASDAQ:UVSP), Ituran Location and Control Ltd. (NASDAQ:ITRN), and Noble Corporation plc (NYSE:NE). This group of stocks' market values resemble VKTX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JOUT,11,60260,-1 UVSP,9,35349,4 ITRN,11,126208,2 NE,23,102367,-1 Average,13.5,81046,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $73 million in VKTX's case. Noble Corporation plc (NYSE:NE) is the most popular stock in this table. On the other hand Univest Financial Corporation (NASDAQ:UVSP) is the least popular one with only 9 bullish hedge fund positions. Viking Therapeutics, Inc. (NASDAQ:VKTX) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately VKTX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on VKTX were disappointed as the stock returned -21.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.