Did Hedge Funds Make The Right Call On Retrophin Inc (RTRX) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtRetrophin Inc (NASDAQ:RTRX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Retrophin Inc (NASDAQ:RTRX) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Aerie Pharmaceuticals Inc (NASDAQ:AERI), AAR Corp. (NYSE:AIR), and Bloomin’ Brands Inc (NASDAQ:BLMN) to gather more data points. Our calculations also showed that RTRX 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.

If you’d ask most investors, hedge funds are assumed to be worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds trading today, Our researchers look at the top tier of this group, around 850 funds. Most estimates calculate that this group of people oversee bulk of all hedge funds’ total capital, and by keeping track of their matchless equity investments, Insider Monkey has identified a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year 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 .

Jeremy Mindich of Scopia Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to review the fresh hedge fund action regarding Retrophin Inc (NASDAQ:RTRX).

How have hedgies been trading Retrophin Inc (NASDAQ:RTRX)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in RTRX a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Peter Kolchinsky’s RA Capital Management has the biggest position in Retrophin Inc (NASDAQ:RTRX), worth close to $60.8 million, comprising 1.9% of its total 13F portfolio. Coming in second is Joseph Edelman of Perceptive Advisors, with a $42.2 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise Mitchell Blutt’s Consonance Capital Management, Matt Sirovich and Jeremy Mindich’s Scopia Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Retrophin Inc (NASDAQ:RTRX), around 2.51% of its 13F portfolio. Scopia Capital is also relatively very bullish on the stock, setting aside 2.32 percent of its 13F equity portfolio to RTRX.

Due to the fact that Retrophin Inc (NASDAQ:RTRX) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies who were dropping their positions entirely heading into Q4. It’s worth mentioning that Michael Rockefeller and KarláKroeker’s Woodline Partners cut the biggest stake of all the hedgies watched by Insider Monkey, valued at about $4 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also cut its stock, about $2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Retrophin Inc (NASDAQ:RTRX) but similarly valued. We will take a look at Aerie Pharmaceuticals Inc (NASDAQ:AERI), AAR Corp. (NYSE:AIR), Bloomin’ Brands Inc (NASDAQ:BLMN), and Qutoutiao Inc. (NASDAQ:QTT). All of these stocks’ market caps match RTRX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $258 million in RTRX’s case. Aerie Pharmaceuticals Inc (NASDAQ:AERI) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 9 bullish hedge fund positions. Retrophin Inc (NASDAQ:RTRX) 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on RTRX as the stock returned 39.9% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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