Is LGND A Good Stock To Buy According To Hedge Funds?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Ligand Pharmaceuticals Inc. (NASDAQ:LGND) based on that data.

Is LGN a good stock to buy? Ligand Pharmaceuticals Inc. (NASDAQ:LGND) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that LGND 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). At the end of this article we will also compare LGND to other stocks including CorVel Corporation (NASDAQ:CRVL), GCP Applied Technologies Inc. (NYSE:GCP), and Cytokinetics, Inc. (NASDAQ:CYTK) to get a better sense of its popularity.

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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.

Aaron Cowen Suvretta Capital

Aaron Cowen of Suvretta Capital Management

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. Now let’s take a gander at the fresh hedge fund action regarding Ligand Pharmaceuticals Inc. (NASDAQ:LGND).

Do Hedge Funds Think LGND Is A Good Stock To Buy Now?

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in LGND over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is LGND A Good Stock To Buy?

More specifically, Cardinal Capital was the largest shareholder of Ligand Pharmaceuticals Inc. (NASDAQ:LGND), with a stake worth $89.7 million reported as of the end of September. Trailing Cardinal Capital was Stonepine Capital, which amassed a stake valued at $30.6 million. Dorset Management, Arrowstreet Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Stonepine Capital allocated the biggest weight to Ligand Pharmaceuticals Inc. (NASDAQ:LGND), around 31.88% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, setting aside 13.87 percent of its 13F equity portfolio to LGND.

Judging by the fact that Ligand Pharmaceuticals Inc. (NASDAQ:LGND) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of funds that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Renaissance Technologies dropped the biggest position of all the hedgies followed by Insider Monkey, worth close to $15.2 million in stock. David Harding’s fund, Winton Capital Management, also sold off its stock, about $2.5 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ligand Pharmaceuticals Inc. (NASDAQ:LGND) but similarly valued. These stocks are CorVel Corporation (NASDAQ:CRVL), GCP Applied Technologies Inc. (NYSE:GCP), Cytokinetics, Inc. (NASDAQ:CYTK), Maxar Technologies Inc (NYSE:MAXR), Skyline Champion Corporation (NYSE:SKY), Edgewell Personal Care Company (NYSE:EPC), and Meritor Inc (NYSE:MTOR). This group of stocks’ market caps are similar to LGND’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRVL 12 120490 -3
GCP 21 375404 0
CYTK 26 429147 0
MAXR 17 150012 2
SKY 23 205908 0
EPC 21 188145 1
MTOR 17 192344 -1
Average 19.6 237350 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $259 million in LGND’s case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table. On the other hand CorVel Corporation (NASDAQ:CRVL) is the least popular one with only 12 bullish hedge fund positions. Ligand Pharmaceuticals Inc. (NASDAQ:LGND) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LGND is 64.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately LGND wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on LGND were disappointed as the stock returned 6.8% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.

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