Should I Avoid Agios Pharmaceuticals Inc (AGIO)?

With the second-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the third quarter of 2021. One of these stocks was Agios Pharmaceuticals Inc (NASDAQ:AGIO).

Is Agios Pharmaceuticals Inc (NASDAQ:AGIO) an exceptional stock to buy now? Investors who are in the know were reducing their bets on the stock. The number of bullish hedge fund bets went down by 3 lately. Agios Pharmaceuticals Inc (NASDAQ:AGIO) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistic is 31. Our calculations also showed that AGIO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 22 hedge funds in our database with AGIO positions at the end of the first quarter.

If you’d ask most shareholders, hedge funds are assumed to be slow, outdated investment tools of yesteryear. While there are over 8000 funds with their doors open today, Our experts choose to focus on the upper echelon of this group, around 850 funds. These hedge fund managers command the lion’s share of all hedge funds’ total capital, and by following their top equity investments, Insider Monkey has unearthed many investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Now we’re going to take a look at the latest hedge fund action surrounding Agios Pharmaceuticals Inc (NASDAQ:AGIO).

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

At second quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in AGIO over the last 24 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Rock Springs Capital Management was the largest shareholder of Agios Pharmaceuticals Inc (NASDAQ:AGIO), with a stake worth $141.9 million reported as of the end of June. Trailing Rock Springs Capital Management was Casdin Capital, which amassed a stake valued at $119.3 million. Farallon Capital, Suvretta Capital Management, and Woodline Partners 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 Casdin Capital allocated the biggest weight to Agios Pharmaceuticals Inc (NASDAQ:AGIO), around 3.03% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 2.8 percent of its 13F equity portfolio to AGIO.

Judging by the fact that Agios Pharmaceuticals Inc (NASDAQ:AGIO) has witnessed bearish sentiment from the smart money, it’s safe to say that there is a sect of hedge funds that decided to sell off their entire stakes last quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $79.2 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $12.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to Agios Pharmaceuticals Inc (NASDAQ:AGIO). We will take a look at Visteon Corp (NASDAQ:VC), Relay Therapeutics, Inc. (NASDAQ:RLAY), Emergent Biosolutions Inc (NYSE:EBS), SmileDirectClub, Inc. (NASDAQ:SDC), Karuna Therapeutics, Inc. (NASDAQ:KRTX), Macquarie Infrastructure Holdings, LLC (NYSE:MIC), and John Wiley & Sons Inc (NYSE:JW). This group of stocks’ market caps are similar to AGIO’s market cap.

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As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $408 million in AGIO’s case. Macquarie Infrastructure Holdings, LLC (NYSE:MIC) is the most popular stock in this table. On the other hand Emergent Biosolutions Inc (NYSE:EBS) is the least popular one with only 15 bullish hedge fund positions. Agios Pharmaceuticals Inc (NASDAQ:AGIO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AGIO is 30.9. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately AGIO wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AGIO investors were disappointed as the stock returned -11.9% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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