How do we determine whether Ligand Pharmaceuticals Inc. (NASDAQ:LGND) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Ligand Pharmaceuticals Inc. (NASDAQ:LGND) investors should pay attention to a decrease in hedge fund sentiment in recent months. Our calculations also showed that lgnd isn't among the 30 most popular stocks among hedge funds.
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' 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.
Let's take a glance at the latest hedge fund action encompassing Ligand Pharmaceuticals Inc. (NASDAQ:LGND).
How have hedgies been trading Ligand Pharmaceuticals Inc. (NASDAQ:LGND)?
At Q1's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LGND over the last 15 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ligand Pharmaceuticals Inc. (NASDAQ:LGND), which was worth $178 million at the end of the first quarter. On the second spot was Cardinal Capital which amassed $110.9 million worth of shares. Moreover, Dorset Management, Two Sigma Advisors, and Citadel Investment Group 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 faced falling interest from the smart money, it's safe to say that there is a sect of hedge funds that decided to sell off their positions entirely heading into Q3. At the top of the heap, John Osterweis's Osterweis Capital Management dropped the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $7.6 million in stock, and Lawrence Hawkins's Prosight Capital was right behind this move, as the fund said goodbye to about $1.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds heading into Q3.
Let's go over hedge fund activity in other stocks similar to Ligand Pharmaceuticals Inc. (NASDAQ:LGND). We will take a look at Belmond Ltd (NYSE:BEL), PotlatchDeltic Corporation (NASDAQ:PCH), Globant SA (NYSE:GLOB), and BlackLine, Inc. (NASDAQ:BL). All of these stocks' market caps match LGND's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BEL,16,347519,-4 PCH,17,336121,2 GLOB,20,65839,5 BL,20,107437,7 Average,18.25,214229,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $445 million in LGND's case. Globant SA (NYSE:GLOB) is the most popular stock in this table. On the other hand Belmond Ltd (NYSE:BEL) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is more popular among hedge funds. 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 LGND wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LGND were disappointed as the stock returned -12.6% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.