Did Hedge Funds Make The Right Call On argenx SE (ARGX) ?

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 plowed through 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded argenx SE (NASDAQ:ARGX) and determine whether the smart money was really smart about this stock.

Is argenx SE (NASDAQ:ARGX) an outstanding investment today? Investors who are in the know were becoming less confident. The number of bullish hedge fund positions shrunk by 1 lately. Our calculations also showed that ARGX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

If you’d ask most traders, hedge funds are viewed as slow, outdated financial tools of yesteryear. While there are more than 8000 funds with their doors open at present, Our experts look at the top tier of this club, approximately 850 funds. These hedge fund managers manage the lion’s share of the hedge fund industry’s total capital, and by monitoring their unrivaled investments, Insider Monkey has spotted a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. 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 let’s view the latest hedge fund action surrounding argenx SE (NASDAQ:ARGX).

How have hedgies been trading argenx SE (NASDAQ:ARGX)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ARGX over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, Redmile Group held the most valuable stake in argenx SE (NASDAQ:ARGX), which was worth $142.5 million at the end of the third quarter. On the second spot was Baker Bros. Advisors which amassed $134.3 million worth of shares. Avoro Capital Advisors (venBio Select Advisor), Driehaus Capital, and Rock Springs Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Avoro Capital Advisors (venBio Select Advisor) allocated the biggest weight to argenx SE (NASDAQ:ARGX), around 4.16% of its 13F portfolio. Indus Capital is also relatively very bullish on the stock, earmarking 4.09 percent of its 13F equity portfolio to ARGX.

Because argenx SE (NASDAQ:ARGX) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that elected to cut their entire stakes heading into Q4. Interestingly, Oleg Nodelman’s EcoR1 Capital dropped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $32.4 million in stock. Brian Ashford-Russell and Tim Woolley’s fund, Polar Capital, also dumped its stock, about $15.2 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to argenx SE (NASDAQ:ARGX). These stocks are Elbit Systems Ltd. (NASDAQ:ESLT), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Jazz Pharmaceuticals Plc (NASDAQ:JAZZ), and Knight-Swift Transportation Holdings Inc. (NYSE:KNX). This group of stocks’ market values are closest to ARGX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESLT 6 13855 3
HZNP 41 1686085 8
JAZZ 29 805357 4
KNX 32 352814 6
Average 27 714528 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $715 million. That figure was $589 million in ARGX’s case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 6 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 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 ARGX as the stock returned 71% 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.