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.
Is Viking Therapeutics, Inc. (NASDAQ:VKTX) a bargain? Hedge funds are selling. The number of long hedge fund bets were cut by 3 recently. Our calculations also showed that VKTX 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.
In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's view the key hedge fund action encompassing Viking Therapeutics, Inc. (NASDAQ:VKTX).
How are hedge funds trading Viking Therapeutics, Inc. (NASDAQ:VKTX)?
At Q2's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards VKTX over the last 16 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Park West Asset Management held the most valuable stake in Viking Therapeutics, Inc. (NASDAQ:VKTX), which was worth $14.5 million at the end of the second quarter. On the second spot was Sio Capital which amassed $6.3 million worth of shares. Moreover, Rubric Capital Management, Citadel Investment Group, and OZ Management were also bullish on Viking Therapeutics, Inc. (NASDAQ:VKTX), allocating a large percentage of their portfolios to this stock.
Seeing as Viking Therapeutics, Inc. (NASDAQ:VKTX) has witnessed bearish sentiment from hedge fund managers, we can see that there lies a certain "tier" of hedgies that slashed their full holdings in the second quarter. At the top of the heap, Principal Global Investors's Columbus Circle Investors sold off the biggest position of the "upper crust" of funds followed by Insider Monkey, valued at about $3.6 million in stock. Vishal Saluja and Pham Quang's fund, Endurant Capital Management, also dumped its stock, about $1.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds in the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Viking Therapeutics, Inc. (NASDAQ:VKTX) but similarly valued. We will take a look at RISE Education Cayman Ltd (NASDAQ:REDU), Bank of Marin Bancorp (NASDAQ:BMRC), Aurora Mobile Limited (NASDAQ:JG), and Bridge Bancorp, Inc. (NASDAQ:BDGE). This group of stocks' market caps are similar to VKTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position REDU,6,6310,3 BMRC,5,18128,-2 JG,1,18,0 BDGE,10,95847,-1 Average,5.5,30076,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $46 million in VKTX's case. Bridge Bancorp, Inc. (NASDAQ:BDGE) is the most popular stock in this table. On the other hand Aurora Mobile Limited (NASDAQ:JG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Viking Therapeutics, Inc. (NASDAQ:VKTX) is more popular among hedge funds. 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 VKTX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on VKTX were disappointed as the stock returned -17.1% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.