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Should You Buy Viking Therapeutics, Inc. (VKTX)?

We at Insider Monkey have gone over 821 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 March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Viking Therapeutics, Inc. (NASDAQ:VKTX) based on that data.

Is Viking Therapeutics, Inc. (NASDAQ:VKTX) worth your attention right now? Investors who are in the know are getting more optimistic. The number of long hedge fund bets advanced by 3 in recent months. Our calculations also showed that VKTX 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Nathan Fischel DAFNA Capital

Nathan Fischel of DAFNA Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Viking Therapeutics, Inc. (NASDAQ:VKTX).

What does smart money think about Viking Therapeutics, Inc. (NASDAQ:VKTX)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VKTX over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Viking Therapeutics, Inc. (NASDAQ:VKTX) was held by Park West Asset Management, which reported holding $7.5 million worth of stock at the end of September. It was followed by Sio Capital with a $3.5 million position. Other investors bullish on the company included Sphera Global Healthcare Fund, DAFNA Capital Management, and Baker Bros. Advisors. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Viking Therapeutics, Inc. (NASDAQ:VKTX), around 1.18% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, designating 0.88 percent of its 13F equity portfolio to VKTX.

As one would reasonably expect, specific money managers have jumped into Viking Therapeutics, Inc. (NASDAQ:VKTX) headfirst. Sphera Global Healthcare Fund, managed by Doron Breen and Mori Arkin, established the largest position in Viking Therapeutics, Inc. (NASDAQ:VKTX). Sphera Global Healthcare Fund had $2.8 million invested in the company at the end of the quarter. Henrik Rhenman’s Rhenman & Partners Asset Management also initiated a $0.9 million position during the quarter. The following funds were also among the new VKTX investors: Israel Englander’s Millennium Management, Mike Vranos’s Ellington, and Minhua Zhang’s Weld Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Viking Therapeutics, Inc. (NASDAQ:VKTX) but similarly valued. We will take a look at Tutor Perini Corp (NYSE:TPC), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), Chesapeake Energy Corporation (NYSE:CHK), and Signet Jewelers Limited (NYSE:SIG). This group of stocks’ market values are closest to VKTX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TPC 10 12342 -5
MOFG 9 10690 2
CHK 15 12034 -4
SIG 25 72355 3
Average 14.75 26855 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $25 million in VKTX’s case. Signet Jewelers Limited (NYSE:SIG) is the most popular stock in this table. On the other hand MidWestOne Financial Group, Inc. (NASDAQ:MOFG) is the least popular one with only 9 bullish hedge fund positions. Viking Therapeutics, Inc. (NASDAQ:VKTX) 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on VKTX as the stock returned 67.7% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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