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Did Hedge Funds Make The Right Call On Agios Pharmaceuticals Inc (AGIO) ?

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 Agios Pharmaceuticals Inc (NASDAQ:AGIO) and determine whether hedge funds skillfully traded this stock.

Agios Pharmaceuticals Inc (NASDAQ:AGIO) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare AGIO to other stocks including Euronav NV (NYSE:EURN), Allogene Therapeutics, Inc. (NASDAQ:ALLO), and NovaGold Resources Inc. (NYSE:NG) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (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

Samuel Isaly of OrbiMed Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to take a peek at the recent hedge fund action encompassing Agios Pharmaceuticals Inc (NASDAQ:AGIO).

How are hedge funds trading Agios Pharmaceuticals Inc (NASDAQ:AGIO)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AGIO over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the largest position in Agios Pharmaceuticals Inc (NASDAQ:AGIO). OrbiMed Advisors has a $58.6 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is Farallon Capital, holding a $44.4 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Eli Casdin’s Casdin Capital, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management and Joseph Edelman’s Perceptive Advisors. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to Agios Pharmaceuticals Inc (NASDAQ:AGIO), around 4.03% of its 13F portfolio. Integral Health Asset Management is also relatively very bullish on the stock, dishing out 2.34 percent of its 13F equity portfolio to AGIO.

Due to the fact that Agios Pharmaceuticals Inc (NASDAQ:AGIO) has witnessed bearish sentiment from the smart money, it’s safe to say that there exists a select few funds that elected to cut their full holdings by the end of the first quarter. It’s worth mentioning that Eric Bannasch’s Cadian Capital sold off the biggest investment of the 750 funds watched by Insider Monkey, valued at close to $3.6 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also dumped its stock, about $3.3 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Agios Pharmaceuticals Inc (NASDAQ:AGIO) but similarly valued. We will take a look at Euronav NV (NYSE:EURN), Allogene Therapeutics, Inc. (NASDAQ:ALLO), NovaGold Resources Inc. (NYSE:NG), and Corelogic Inc (NYSE:CLGX). This group of stocks’ market caps resemble AGIO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EURN 33 236366 5
ALLO 12 101735 0
NG 19 297032 3
CLGX 31 253322 3
Average 23.75 222114 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $222 million. That figure was $304 million in AGIO’s case. Euronav NV (NYSE:EURN) is the most popular stock in this table. On the other hand Allogene Therapeutics, Inc. (NASDAQ:ALLO) is the least popular one with only 12 bullish hedge fund positions. Agios Pharmaceuticals Inc (NASDAQ:AGIO) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on AGIO as the stock returned 50.7% during the second quarter and outperformed the market by an even larger margin.

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