Is Ionis Pharmaceuticals Inc (IONS) Going to Burn These Hedge Funds?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Ionis Pharmaceuticals Inc (NASDAQ:IONS) has experienced an increase in activity from the world’s largest hedge funds in recent months. 23 hedge funds that we track were long the stock on September 30. There were 16 hedge funds in our database with IONS holdings at the end of the previous quarter. At the end of this article we will also compare IONS to other stocks including LATAM Airlines Group SA (ADR) (NYSE:LFL), Endurance Specialty Holdings Ltd. (NYSE:ENH), and Eaton Vance Corp (NYSE:EV) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

Hedge fund activity in Ionis Pharmaceuticals Inc (NASDAQ:IONS)

Heading into the fourth quarter of 2016, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 44% leap from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in IONS heading into this year, so hedge fund ownership is also positive for the year now after the Q3 surge. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management has the largest position in Ionis Pharmaceuticals Inc (NASDAQ:IONS), worth close to $58.9 million. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $25.8 million position. Remaining hedge funds and institutional investors that are bullish contain Christopher James’ Partner Fund Management, Cliff Asness’ AQR Capital Management, and Christopher James’ Partner Fund Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, some big names were breaking ground themselves. Millennium Management established the largest position in Ionis Pharmaceuticals Inc (NASDAQ:IONS). Arrowstreet Capital‘s aforementioned $25.8 million investment in the stock during the quarter was also a new position. The other funds with new positions in the stock are Partner Fund Management and Ken Griffin’s Citadel Investment Group.

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. We will take a look at LATAM Airlines Group SA (ADR) (NYSE:LFL), Endurance Specialty Holdings Ltd. (NYSE:ENH), Eaton Vance Corp (NYSE:EV), and CONSOL Energy Inc. (NYSE:CNX). This group of stocks’ market caps are similar to IONS’s market cap.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $534 million. That figure was $202 million in IONS’s case. CONSOL Energy Inc. (NYSE:CNX) is the most popular stock in this table. On the other hand LATAM Airlines Group SA (ADR) (NYSE:LFL) is the least popular one with only 8 bullish hedge fund positions. Ionis Pharmaceuticals Inc (NASDAQ:IONS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CNX might be a better candidate to consider taking a long position in.

Disclosure: None