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Did Hedge Funds Drop The Ball On argenx SE (ARGX) ?

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

argenx SE (NASDAQ:ARGX) has seen a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that argx 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.

Samuel Isaly Orbimed Advisors

We’re going to review the latest hedge fund action surrounding argenx SE (NASDAQ:ARGX).

How are hedge funds trading argenx SE (NASDAQ:ARGX)?

At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ARGX over the last 14 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

No of Hedge Funds With ARGX Positions

More specifically, Baker Bros. Advisors was the largest shareholder of argenx SE (NASDAQ:ARGX), with a stake worth $97.9 million reported as of the end of September. Trailing Baker Bros. Advisors was Redmile Group, which amassed a stake valued at $92.3 million. venBio Select Advisor, EcoR1 Capital, and OrbiMed Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Since argenx SE (NASDAQ:ARGX) has witnessed bearish sentiment from the smart money, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes last quarter. Interestingly, Phill Gross and Robert Atchinson’s Adage Capital Management cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising close to $77.1 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dumped about $10.7 million worth. These moves are important to note, as total hedge fund interest fell by 7 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as argenx SE (NASDAQ:ARGX) but similarly valued. These stocks are Zynga Inc (NASDAQ:ZNGA), EnerSys (NYSE:ENS), Olin Corporation (NYSE:OLN), and Essent Group Ltd (NYSE:ESNT). This group of stocks’ market caps are closest to ARGX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZNGA 29 725450 3
ENS 22 132184 4
OLN 33 638129 6
ESNT 28 369859 -2
Average 28 466406 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $466 million. That figure was $710 million in ARGX’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand EnerSys (NYSE:ENS) is the least popular one with only 22 bullish hedge fund positions. argenx SE (NASDAQ:ARGX) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on ARGX, though not to the same extent, as the stock returned 23.4% and outperformed the market as well.

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

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