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Were Hedge Funds Right About Dumping Viking Therapeutics, Inc. (VKTX) ?

Nina Todic

We can judge whether Viking Therapeutics, Inc. (NASDAQ:VKTX) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Viking Therapeutics, Inc. (NASDAQ:VKTX) has seen a decrease in activity from the world's largest hedge funds in recent months. VKTX was in 20 hedge funds' portfolios at the end of the fourth quarter of 2018. There were 27 hedge funds in our database with VKTX positions at the end of the previous quarter. Our calculations also showed that vktx isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Castor Sio Capital

Let's take a gander at the latest hedge fund action regarding Viking Therapeutics, Inc. (NASDAQ:VKTX).

What does the smart money think about Viking Therapeutics, Inc. (NASDAQ:VKTX)?

Heading into the first quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in VKTX a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

No of Hedge Funds with VKTX Positions

The largest stake in Viking Therapeutics, Inc. (NASDAQ:VKTX) was held by Park West Asset Management, which reported holding $12.8 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $7.6 million position. Other investors bullish on the company included Opaleye Management, Columbus Circle Investors, and Sio Capital.

Because Viking Therapeutics, Inc. (NASDAQ:VKTX) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of hedge funds that slashed their positions entirely heading into Q3. Intriguingly, James E. Flynn's Deerfield Management cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling close to $8 million in stock, and Ori Hershkovitz's Nexthera Capital was right behind this move, as the fund cut about $5.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 7 funds heading into Q3.

Let's go over hedge fund activity in other stocks similar to Viking Therapeutics, Inc. (NASDAQ:VKTX). We will take a look at pdvWireless Inc (NASDAQ:PDVW), Omeros Corporation (NASDAQ:OMER), Re/Max Holdings Inc (NYSE:RMAX), and Omega Flex, Inc. (NASDAQ:OFLX). All of these stocks' market caps are closest to VKTX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PDVW,12,259922,3 OMER,7,40210,-1 RMAX,5,46656,-5 OFLX,5,8298,1 Average,7.25,88772,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $56 million in VKTX's case. pdvWireless Inc (NASDAQ:PDVW) is the most popular stock in this table. On the other hand Re/Max Holdings Inc (NYSE:RMAX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Viking Therapeutics, Inc. (NASDAQ:VKTX) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately VKTX wasn't nearly as popular as these 15 stock and hedge funds that were betting on VKTX were disappointed as the stock returned 14% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

Disclosure: None. This article was originally published at Insider Monkey.

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