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Hedge Funds Are Dumping Ardelyx Inc (ARDX)

In this article we will take a look at whether hedge funds think Ardelyx Inc (NASDAQ:ARDX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Ardelyx Inc (NASDAQ:ARDX) was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. ARDX shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. There were 25 hedge funds in our database with ARDX positions at the end of the previous quarter. Our calculations also showed that ARDX 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.

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.

Peter Kolchinsky of RA Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the latest hedge fund action encompassing Ardelyx Inc (NASDAQ:ARDX).

How have hedgies been trading Ardelyx Inc (NASDAQ:ARDX)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in ARDX a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is ARDX A Good Stock To Buy?

The largest stake in Ardelyx Inc (NASDAQ:ARDX) was held by RA Capital Management, which reported holding $36.5 million worth of stock at the end of September. It was followed by Adage Capital Management with a $29.9 million position. Other investors bullish on the company included Rock Springs Capital Management, Redmile Group, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position 683 Capital Partners allocated the biggest weight to Ardelyx Inc (NASDAQ:ARDX), around 1.45% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 1.18 percent of its 13F equity portfolio to ARDX.

Because Ardelyx Inc (NASDAQ:ARDX) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that elected to cut their full holdings by the end of the first quarter. It’s worth mentioning that Arsani William’s Logos Capital dumped the biggest stake of the 750 funds followed by Insider Monkey, worth close to $1.6 million in stock. Matthew L Pinz’s fund, Pinz Capital, also dropped its stock, about $1.5 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ardelyx Inc (NASDAQ:ARDX) but similarly valued. These stocks are Lantheus Holdings Inc (NASDAQ:LNTH), Loral Space & Communications Ltd. (NASDAQ:LORL), Preferred Bank (NASDAQ:PFBC), and LeMaitre Vascular Inc (NASDAQ:LMAT). This group of stocks’ market caps are closest to ARDX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LNTH 20 77954 4
LORL 19 223665 1
PFBC 7 24634 -4
LMAT 6 4580 -3
Average 13 82708 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $203 million in ARDX’s case. Lantheus Holdings Inc (NASDAQ:LNTH) is the most popular stock in this table. On the other hand LeMaitre Vascular Inc (NASDAQ:LMAT) is the least popular one with only 6 bullish hedge fund positions. Ardelyx Inc (NASDAQ:ARDX) is not the most popular stock in this group but hedge fund interest is still above 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on ARDX, though not to the same extent, as the stock returned 21.2% during the first two months and seventeen days of the second quarter and outperformed the market as well.

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