We recently published a list of 10 Worst Booming Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Viking Therapeutics, Inc. (NASDAQ:VKTX) stands against other worst booming stocks to buy according to short sellers.
Are We Really In September?
September has historically been one of the worst months for US stocks. Considering this and the performance of big tech, particularly AI stocks, in the first week of the month, many investors have been shocked by the performance of the S&P 500 and the Nasdaq Composite Index in the second week of September. Both indices showcased their best performance this year during this week, and both were up for five days in a row. So, it’s not surprising that many investors are confused about what this means and how this even came about in the first place.
According to Tom Lee, Co-founder and Managing Partner at Fundstrat Global Advisors, this is the type of performance investors can expect to see over the next eight weeks up to Election Day – and perhaps even for a couple of weeks after that. With the much-awaited Fed meeting also coming up next week, Lee expects more support especially since we already have enough reason to believe that the Fed is going to make some cuts. According to Lee, with the inflation data coming in better than before and with the labor markets needing more support, the Fed’s actions will give the markets more confidence. This will translate into stocks trading well in the upcoming weeks.
Expected Future Trends
Lee noted that, at least for the next 12 months, investors should be more confident about the markets and their performance. The potential rate cut is not the only reason for this. Another positive factor is the upcoming election – according to Lee, historically, the markets have always performed well in the months coming after an election. This past trend is making the November-December period also look good for stocks in the US. Lee also commented that the policies of both Presidential candidates are good enough for the markets to do well in 2025 as well. So, even if investors see a little more turbulence, the long-term expectations for the market seem largely positive.
In terms of what stocks investors should be looking at in this new environment, Lee noted that the general rule for any investor should be to buy the best companies in any area first. These would be the companies that are able to beat any type of cycle and promise high returns to their shareholders, basically blue chip stocks. At the same time, Lee expects that when the Fed moves rates back toward neutral, cyclical and small-cap stocks will also benefit immensely from the tailwinds created by this move. Because of this, Lee expects small-caps to do really well in the next 12 months.
These insights have highlighted that the markets are now on an upward growth trajectory, and we’ve been seeing a lot of stocks generate immense returns because of this. However, many such booming stocks are being relentlessly shorted, which may brew confusion among investors about which companies to buy now. We’ve thus compiled a list of some booming stocks that short sellers consider to be the worst players in the market and explained whether you should consider buying them or not.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
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Viking Therapeutics, Inc. (NASDAQ:VKTX)
Year-to-Date Performance as of September 14: 265.04%
Short % of Shares Outstanding as of September 14: 15.5%
Number of Hedge Fund Holders: 50
Viking Therapeutics, Inc. (NASDAQ:VKTX) is another biotech company on our list. It develops novel therapies for metabolic and endocrine disorders.
Despite what short sellers may have you think, Viking Therapeutics, Inc. (NASDAQ:VKTX) is a biotech company with immense growth potential. Currently, the company has an investigational obesity drug in trials. If the drug succeeds, it could offer robust competition to major pharmaceutical companies such as Novo Nordisk and Eli Lilly, especially since Viking Therapeutics, Inc.’s (NASDAQ:VKTX) drug is administered orally – which makes it easier to take than Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound.
Viking Therapeutics, Inc. (NASDAQ:VKTX) also has a strong balance sheet, reporting over $900 million in case in the second quarter. This highlights the company’s ability to keep up with all of its pipeline programs. However, seeing as the company is still far behind other pharma companies, it has been seeing greater losses. In the second quarter, for instance, Viking Therapeutics, Inc. (NASDAQ:VKTX) reported a net loss of $49.6 million. In spite of all this, many investors and hedge funds continue to stick with this stock because of the immense potential it has to grow and challenge big pharma players in the market.
We saw 50 hedge funds long Viking Therapeutics, Inc. (NASDAQ:VKTX) in the second quarter, with a total stake value of $479.1 million.
Fred Alger Management mentioned Viking Therapeutics, Inc. (NASDAQ:VKTX) in its second-quarter 2024 investor letter:
“Viking Therapeutics, Inc. (NASDAQ:VKTX) is a clinical-stage biopharmaceutical company focused on developing novel therapies for patients suffering from metabolic and endocrine disorders. Their lead drug VK2809, a beta-selective thyroid hormone receptor agonist, is in development for nonalcoholic steatohepatitis and nonalcoholic fatty liver disease. Their VK2735 drug is a GLP-1 dual agonist being developed for patients with obesity. During the quarter, the company’s shares were negatively impacted by several factors: 1) a challenging environment for biotechnology stocks, exacerbated by Fed policy decisions to maintain elevated interest rates, 2) increased competition in the obesity treatment landscape, 3) manufacturability and scalability concerns regarding Viking’s obesity drug and 4) the absence of strategic partnerships from large pharmaceutical companies. Despite the challenging quarter, we continue to believe that the company’s GLP-1 drug has the potential to be a best-in-class obesity drug given its favorable efficacy and safety profile. Further, with approximately one-third of U.S. adults suffering from obesity, we believe the company’s GLP[1]1 drug has the potential to address a large market once approved.”
Overall, VKTX ranks 1st on our list of 10 worst booming stocks to buy according to short sellers. While we acknowledge the potential of VKTX as an investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VKTX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.