Hedge Funds Are Betting On Ariad Pharmaceuticals, Inc. (ARIA)

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Is Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) a healthy stock for your portfolio? Prominent investors are getting more optimistic. The number of bullish hedge fund positions moved up by 2 lately. 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 BlackRock Credit All Inc Trust IV (NYSE:BTZ), Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL), and Brink’S Co (NYSE:BCO) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, let’s view the key action surrounding Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA).

How are hedge funds trading Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA)?

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 7% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Sarissa Capital Management, run by Alex Denner, holds the biggest position in Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA). According to regulatory filings, the fund has a $175.9 million position in the stock, comprising 40.5% of its 13F portfolio. The second largest stake is held by Consonance Capital Management, led by Mitchell Blutt, which holds a $119 million position; 11.5% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Zach Schreiber’s Point State Capital, William Leland Edwards’s Palo Alto Investors and Jeremy Green’s Redmile Group.

As one would reasonably expect, some big names have been driving this bullishness. Redmile Group, managed by Jeremy Green, created the most outsized position in Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA). The fund reportedly had $29.3 million invested in the company at the end of the quarter. Warren Lammert’s Granite Point Capital also initiated a $6.3 million position during the quarter. The following funds were also among the new ARIA investors: John Overdeck and David Siegel’s Two Sigma Advisors, Joel Greenblatt’s Gotham Asset Management, and Cliff Asness’s AQR Capital Management.

Let’s go over hedge fund activity in other stocks similar to Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA). These stocks are BlackRock Credit All Inc Trust IV (NYSE:BTZ), Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL), Brink’S Co (NYSE:BCO), and Federal-Mogul Corporation (NASDAQ:FDML). This group of stocks’ market caps resemble ARIA’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $500 million. That figure was $564 million in ARIA’s case. Brink’S Co (NYSE:BCO) is the most popular stock in this table. On the other hand BlackRock Credit All Inc Trust IV (NYSE:BTZ) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.