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Agios Pharmaceuticals Inc (AGIO) Is Burning These Hedge Funds

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article we look at what those investors think of Agios Pharmaceuticals Inc (NASDAQ:AGIO).

Agios Pharmaceuticals Inc (NASDAQ:AGIO) has seen a decrease in hedge fund sentiment recently. AGIO was in 18 hedge funds’ portfolios at the end of the second quarter of 2019. There were 22 hedge funds in our database with AGIO holdings at the end of the previous quarter. Our calculations also showed that AGIO isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Kris Jenner - Rock Springs Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action regarding Agios Pharmaceuticals Inc (NASDAQ:AGIO).

What does smart money think about Agios Pharmaceuticals Inc (NASDAQ:AGIO)?

At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AGIO over the last 16 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

AGIO_oct2019

More specifically, Alkeon Capital Management was the largest shareholder of Agios Pharmaceuticals Inc (NASDAQ:AGIO), with a stake worth $34.2 million reported as of the end of March. Trailing Alkeon Capital Management was Citadel Investment Group, which amassed a stake valued at $31.5 million. Casdin Capital, Alyeska Investment Group, and Rock Springs Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Because Agios Pharmaceuticals Inc (NASDAQ:AGIO) has experienced a decline in interest from the smart money, it’s easy to see that there exists a select few hedgies who sold off their positions entirely in the second quarter. It’s worth mentioning that Neil Woodford’s Woodford Investment Management cut the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $149.3 million in stock. Brian Ashford-Russell and Tim Woolley’s fund, Polar Capital, also dropped its stock, about $15.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 4 funds in the second quarter.

Let’s check out hedge fund activity in other stocks similar to Agios Pharmaceuticals Inc (NASDAQ:AGIO). We will take a look at Nextera Energy Partners LP (NYSE:NEP), Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA), Covetrus, Inc. (NASDAQ:CVET), and Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB). All of these stocks’ market caps resemble AGIO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NEP 13 51281 4
LEXEA 30 381843 1
CVET 20 426961 2
OMAB 7 54603 1
Average 17.5 228672 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $229 million. That figure was $131 million in AGIO’s case. Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is the least popular one with only 7 bullish hedge fund positions. Agios Pharmaceuticals Inc (NASDAQ:AGIO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 AGIO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AGIO were disappointed as the stock returned -35% 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 so far this year.

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

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