We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) and determine whether hedge funds skillfully traded this stock.
Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) investors should be aware of an increase in hedge fund interest of late. Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. There were 22 hedge funds in our database with IONS holdings at the end of March. Our calculations also showed that IONS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 56 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Siegel of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a peek at the new hedge fund action regarding Ionis Pharmaceuticals, Inc. (NASDAQ:IONS).
What does smart money think about Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)?
Heading into the third quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the first quarter of 2020. On the other hand, there were a total of 18 hedge funds with a bullish position in IONS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), worth close to $103.3 million, amounting to 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is Biotechnology Value Fund / BVF Inc, managed by Mark Lampert, which holds a $83.9 million position; 5.2% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish include Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Biotechnology Value Fund / BVF Inc allocated the biggest weight to Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), around 5.17% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, dishing out 1.64 percent of its 13F equity portfolio to IONS.
Consequently, some big names have jumped into Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) headfirst. PDT Partners, managed by Peter Muller, created the largest position in Ionis Pharmaceuticals, Inc. (NASDAQ:IONS). PDT Partners had $6.9 million invested in the company at the end of the quarter. Guy Levy’s Soleus Capital also made a $2.1 million investment in the stock during the quarter. The other funds with brand new IONS positions are Parvinder Thiara’s Athanor Capital, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Minhua Zhang’s Weld Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) but similarly valued. We will take a look at Albemarle Corporation (NYSE:ALB), Immunomedics, Inc. (NASDAQ:IMMU), Royal Gold, Inc (NASDAQ:RGLD), Mobile TeleSystems Public Joint Stock Company (NYSE:MBT), SEI Investments Company (NASDAQ:SEIC), Amdocs Limited (NASDAQ:DOX), and ON Semiconductor Corporation (NASDAQ:ON). All of these stocks’ market caps are similar to IONS’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALB,25,66986,1 IMMU,48,2295437,21 RGLD,27,425497,-1 MBT,11,344072,2 SEIC,37,233631,4 DOX,27,406760,4 ON,32,504577,3 Average,29.6,610994,4.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $611 million. That figure was $388 million in IONS’s case. Immunomedics, Inc. (NASDAQ:IMMU) is the most popular stock in this table. On the other hand Mobile TeleSystems Public Joint Stock Company (NYSE:MBT) is the least popular one with only 11 bullish hedge fund positions. Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IONS is 47.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately IONS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); IONS investors were disappointed as the stock returned -19.5% in 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.