Is Ligand Pharmaceuticals Inc. (NASDAQ:LGND) 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 investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Ligand Pharmaceuticals Inc. (NASDAQ:LGND) has experienced a decrease in support from the world's most elite money managers recently. Our calculations also showed that LGND isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the recent hedge fund action surrounding Ligand Pharmaceuticals Inc. (NASDAQ:LGND).
What does smart money think about Ligand Pharmaceuticals Inc. (NASDAQ:LGND)?
At Q2's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LGND over the last 16 quarters. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ligand Pharmaceuticals Inc. (NASDAQ:LGND), which was worth $146.2 million at the end of the second quarter. On the second spot was Cardinal Capital which amassed $102.3 million worth of shares. Moreover, Dorset Management, Two Sigma Advisors, and Polar Capital were also bullish on Ligand Pharmaceuticals Inc. (NASDAQ:LGND), allocating a large percentage of their portfolios to this stock.
Due to the fact that Ligand Pharmaceuticals Inc. (NASDAQ:LGND) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who sold off their entire stakes in the second quarter. It's worth mentioning that Andrew Feldstein and Stephen Siderow's Blue Mountain Capital said goodbye to the biggest position of the 750 funds monitored by Insider Monkey, worth about $4.4 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund said goodbye to about $1.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 4 funds in the second quarter.
Let's now review hedge fund activity in other stocks similar to Ligand Pharmaceuticals Inc. (NASDAQ:LGND). We will take a look at Korn Ferry (NYSE:KFY), Worthington Industries, Inc. (NYSE:WOR), PQ Group Holdings Inc. (NYSE:PQG), and Acceleron Pharma Inc (NASDAQ:XLRN). All of these stocks' market caps are closest to LGND's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KFY,22,134563,1 WOR,13,61991,-4 PQG,6,55623,0 XLRN,21,349171,0 Average,15.5,150337,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $416 million in LGND's case. Korn Ferry (NYSE:KFY) is the most popular stock in this table. On the other hand PQ Group Holdings Inc. (NYSE:PQG) is the least popular one with only 6 bullish hedge fund positions. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LGND wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LGND were disappointed as the stock returned -12.8% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.