Did Hedge Funds Make The Right Call On Ionis Pharmaceuticals, Inc. (IONS) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) a bargain? Investors who are in the know were taking a bearish view. The number of bullish hedge fund bets decreased by 5 recently. Our calculations also showed that IONS 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). IONS was in 22 hedge funds’ portfolios at the end of March. There were 27 hedge funds in our database with IONS positions at the end of the previous quarter.

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

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Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

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. Keeping this in mind let’s review the recent hedge fund action encompassing Ionis Pharmaceuticals, Inc. (NASDAQ:IONS).

What does smart money think about Ionis Pharmaceuticals, Inc. (NASDAQ:IONS)?

At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in IONS a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Biotechnology Value Fund / BVF Inc was the largest shareholder of Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), with a stake worth $91.9 million reported as of the end of September. Trailing Biotechnology Value Fund / BVF Inc was Citadel Investment Group, which amassed a stake valued at $82.2 million. Renaissance Technologies, Two Sigma Advisors, and EcoR1 Capital 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 Biotechnology Value Fund / BVF Inc allocated the biggest weight to Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), around 8.57% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, designating 1.92 percent of its 13F equity portfolio to IONS.

Since Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of funds that elected to cut their entire stakes by the end of the first quarter. It’s worth mentioning that Samuel Isaly’s OrbiMed Advisors dropped the biggest investment of the 750 funds followed by Insider Monkey, comprising about $6.5 million in stock, and Highbridge Capital Management was right behind this move, as the fund dumped about $5.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 5 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) but similarly valued. These stocks are Guardant Health, Inc. (NASDAQ:GH), Guidewire Software Inc (NYSE:GWRE), ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), and Perrigo Company plc (NYSE:PRGO). All of these stocks’ market caps are similar to IONS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GH 27 549369 -2
GWRE 34 756960 2
ACAD 28 2404189 -6
PRGO 28 463596 1
Average 29.25 1043529 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1044 million. That figure was $342 million in IONS’s case. Guidewire Software Inc (NYSE:GWRE) is the most popular stock in this table. On the other hand Guardant Health, Inc. (NASDAQ:GH) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) is even less popular than GH. 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 but managed to beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on IONS, though not to the same extent, as the stock returned 24.7% during the second quarter and outperformed the market as well.

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