It is already common knowledge that individual investors do not usually have the necessary resources and ability to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by utilizing superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 5.2% over the 12-month period ending October 30th, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey (as of September 2014) generated a return of 9.5% over the same time span, with 63% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their top moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX).
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) was in 17 hedge funds’ portfolios at the end of September. Lexicon Pharmaceuticals investors should be aware of an increase in hedge fund sentiment lately. There were 16 hedge funds in our database with Lexicon Pharmaceuticals positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sykes Enterprises, Incorporated (NASDAQ:SYKE), Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), and Beneficial Mutual Bancorp Inc (NASDAQ:BNCL) to gather more data points.
To the average investor there are a lot of indicators market participants use to value their holdings. A pair of the most under-the-radar indicators are hedge fund and insider trading interest. we have shown that, historically, those who follow the top picks of the best fund managers can trounce the S&P 500 by a superb margin (see the details here).
With all of this in mind, let’s take a peek at the recent action regarding Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX).
Hedge fund activity in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)
Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, up by 6% from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund and institutional investor database, Roberto Mignone’s Bridger Management has the biggest position in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), worth close to $13.9 million, amounting to 0.9% of its total 13F portfolio. On Bridger Management’s heels is Balyasny Asset Management, led by Dmitry Balyasny, holding a $6.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Mark Kingdon’s Kingdon Capital, and Mike Masters’ Masters Capital Management.
As one would reasonably expect, key money managers have jumped into Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) headfirst. Balyasny Asset Management created the most outsized position in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX). Balyasny Asset Management had $6.5 million invested in the company at the end of the quarter. Kingdon Capital also made a $5.6 million investment in the stock during the quarter. The following funds were also among the new Lexicon Pharmaceuticals investors: Hal Mintz’s Sabby Capital, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX). We will take a look at Sykes Enterprises, Incorporated (NASDAQ:SYKE), Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), Beneficial Mutual Bancorp Inc (NASDAQ:BNCL), and The Fresh Market Inc (NASDAQ:TFM). This group of stocks’ market valuations are closest to Lexicon Pharmaceuticals’ market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $48 million in Lexicon Pharmaceuticals’ case. Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) is the most popular stock in this table. On the other hand Sykes Enterprises, Incorporated (NASDAQ:SYKE) is the least popular one with only 16 bullish hedge fund positions. Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) is not the least popular stock in this group but hedge fund interest is still below average, and the amount of capital invested in it is much lower than in any of the other stocks. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Ariad Pharmaceuticals might be a better lesser-known healthcare candidate to consider a long position in.