Do Hedge Funds and Insiders Love Ligand Pharmaceuticals Inc. (LGND)?

Ligand Pharmaceuticals Inc. (NASDAQ:LGND) has experienced a decrease in enthusiasm from smart money lately.

If you’d ask most investors, hedge funds are seen as slow, old financial tools of yesteryear. While there are greater than 8000 funds in operation at the moment, we hone in on the elite of this group, close to 450 funds. It is widely believed that this group has its hands on the majority of the smart money’s total capital, and by paying attention to their best picks, we have discovered a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

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Just as important, positive insider trading activity is a second way to break down the world of equities. Just as you’d expect, there are plenty of motivations for a bullish insider to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the useful potential of this method if piggybackers know what to do (learn more here).

Now, we’re going to take a look at the recent action encompassing Ligand Pharmaceuticals Inc. (NASDAQ:LGND).

How have hedgies been trading Ligand Pharmaceuticals Inc. (NASDAQ:LGND)?

In preparation for this year, a total of 5 of the hedge funds we track held long positions in this stock, a change of -29% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes substantially.

According to our comprehensive database, Baker Bros. Advisors, managed by Julian Baker and Felix Baker, holds the biggest position in Ligand Pharmaceuticals Inc. (NASDAQ:LGND). Baker Bros. Advisors has a $1.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Thomas Bailard of Bailard Inc, with a $0.9 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedgies that are bullish include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management.

Due to the fact that Ligand Pharmaceuticals Inc. (NASDAQ:LGND) has faced declining sentiment from the smart money, logic holds that there lies a certain “tier” of hedgies that decided to sell off their positions entirely heading into 2013. It’s worth mentioning that Richard Schimel’s Diamondback Capital cut the largest position of all the hedgies we monitor, comprising close to $1.4 million in stock.. Gregory Fraser, Rudolph Kluiber, and Timothy Kroch’s fund, GRT Capital Partners, also dropped its stock, about $0.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 2 funds heading into 2013.

Insider trading activity in Ligand Pharmaceuticals Inc. (NASDAQ:LGND)

Insider buying is at its handiest when the company in question has experienced transactions within the past half-year. Over the latest half-year time frame, Ligand Pharmaceuticals Inc. (NASDAQ:LGND) has seen 6 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Ligand Pharmaceuticals Inc. (NASDAQ:LGND). These stocks are Akorn, Inc. (NASDAQ:AKRX), Avanir Pharmaceuticals, Inc. (NASDAQ:AVNR), Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA), Hi-Tech Pharmacal Co. (NASDAQ:HITK), and Sagent Pharmaceuticals Inc (NASDAQ:SGNT). All of these stocks are in the drugs – generic industry and their market caps match LGND’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Akorn, Inc. (NASDAQ:AKRX) 10 1 5
Avanir Pharmaceuticals, Inc. (NASDAQ:AVNR) 4 1 2
Momenta Pharmaceuticals, Inc. (NASDAQ:MNTA) 12 0 8
Hi-Tech Pharmacal Co. (NASDAQ:HITK) 11 0 5
Sagent Pharmaceuticals Inc (NASDAQ:SGNT) 11 0 1

With the returns demonstrated by our strategies, everyday investors must always pay attention to hedge fund and insider trading sentiment, and Ligand Pharmaceuticals Inc. (NASDAQ:LGND) shareholders fit into this picture quite nicely.

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