How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Agios Pharmaceuticals Inc (NASDAQ:AGIO).
Is AGIO a good stock to buy now? Agios Pharmaceuticals Inc (NASDAQ:AGIO) has experienced an increase in support from the world’s most elite money managers of late. Agios Pharmaceuticals Inc (NASDAQ:AGIO) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 30 hedge funds in our database with AGIO positions at the end of the second quarter. Our calculations also showed that AGIO isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s view the latest hedge fund action surrounding Agios Pharmaceuticals Inc (NASDAQ:AGIO).
Do Hedge Funds Think AGIO Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the second quarter of 2020. On the other hand, there were a total of 17 hedge funds with a bullish position in AGIO a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, OrbiMed Advisors, managed by Samuel Isaly, holds the number one position in Agios Pharmaceuticals Inc (NASDAQ:AGIO). OrbiMed Advisors has a $77.3 million position in the stock, comprising 1% of its 13F portfolio. Sitting at the No. 2 spot is Casdin Capital, managed by Eli Casdin, which holds a $61.3 million position; 2.7% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Farallon Capital and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to Agios Pharmaceuticals Inc (NASDAQ:AGIO), around 2.74% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, earmarking 1.77 percent of its 13F equity portfolio to AGIO.
As industrywide interest jumped, key money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most outsized position in Agios Pharmaceuticals Inc (NASDAQ:AGIO). Balyasny Asset Management had $3.2 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $2.6 million position during the quarter. The other funds with brand new AGIO positions are Michael Castor’s Sio Capital, Donald Sussman’s Paloma Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Agios Pharmaceuticals Inc (NASDAQ:AGIO) but similarly valued. We will take a look at White Mountains Insurance Group Ltd (NYSE:WTM), Merit Medical Systems, Inc. (NASDAQ:MMSI), Advanced Energy Industries, Inc. (NASDAQ:AEIS), Masonite International Corp (NYSE:DOOR), Kennametal Inc. (NYSE:KMT), APi Group Corporation (NYSE:APG), and Pretium Resources Inc (NYSE:PVG). This group of stocks’ market values are similar to AGIO’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $330 million in AGIO’s case. Masonite International Corp (NYSE:DOOR) is the most popular stock in this table. On the other hand Kennametal Inc. (NYSE:KMT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Agios Pharmaceuticals Inc (NASDAQ:AGIO) is more popular among hedge funds. Our overall hedge fund sentiment score for AGIO is 86. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Unfortunately AGIO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AGIO were disappointed as the stock returned -5.1% since the end of the third quarter (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.