Were Hedge Funds Right About Buying Aeglea BioTherapeutics, Inc. (AGLE)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) and determine whether hedge funds skillfully traded this stock.

Is Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) a bargain? Prominent investors were taking an optimistic view. The number of long hedge fund positions increased by 1 lately. Our calculations also showed that AGLE 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). AGLE was in 13 hedge funds’ portfolios at the end of the first quarter of 2020. There were 12 hedge funds in our database with AGLE positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most stock holders, hedge funds are assumed to be slow, old financial vehicles of years past. While there are over 8000 funds trading today, We choose to focus on the masters of this group, about 850 funds. These hedge fund managers orchestrate the lion’s share of all hedge funds’ total asset base, and by keeping an eye on their first-class picks, Insider Monkey has figured out a number of investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Wil Harkey Nantahala Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the top 20 agriculture producing countries to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the latest hedge fund action surrounding Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE).

What does smart money think about Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE)?

Heading into the second quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AGLE over the last 18 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is AGLE A Good Stock To Buy?

More specifically, OrbiMed Advisors was the largest shareholder of Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), with a stake worth $13.4 million reported as of the end of September. Trailing OrbiMed Advisors was Nantahala Capital Management, which amassed a stake valued at $13.1 million. Baker Bros. Advisors, Adage Capital Management, and Marshall Wace LLP 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 Soleus Capital allocated the biggest weight to Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), around 2.91% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, designating 0.49 percent of its 13F equity portfolio to AGLE.

As aggregate interest increased, key money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, initiated the biggest position in Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE). D E Shaw had $0.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.1 million position during the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) but similarly valued. These stocks are Select Bancorp, Inc. (NASDAQ:SLCT), Liquidia Technologies, Inc. (NASDAQ:LQDA), Horizon Technology Finance Corp (NASDAQ:HRZN), and First Guaranty Bancshares, Inc. (NASDAQ:FGBI). All of these stocks’ market caps are similar to AGLE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLCT 6 8927 1
LQDA 6 14895 -1
HRZN 3 2998 -1
FGBI 1 557 0
Average 4 6844 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $55 million in AGLE’s case. Select Bancorp, Inc. (NASDAQ:SLCT) is the most popular stock in this table. On the other hand First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on AGLE as the stock returned 111.2% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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