We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that RARE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are assumed to be slow, old financial tools of the past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the aristocrats of this club, about 750 funds. These investment experts preside over the majority of the smart money’s total capital, and by watching their best equity investments, Insider Monkey has unsheathed various investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Samuel Isaly of OrbiMed Advisors
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the recent hedge fund action encompassing Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
How are hedge funds trading Ultragenyx Pharmaceutical Inc (NASDAQ:RARE)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in RARE over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Panayotis Takis Sparaggis’s Alkeon Capital Management has the biggest position in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), worth close to $67.9 million, corresponding to 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is OrbiMed Advisors, led by Samuel Isaly, holding a $35.7 million position; 0.7% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism comprise Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, Ken Griffin’s Citadel Investment Group and Jacob Doft’s Highline Capital Management. In terms of the portfolio weights assigned to each position Highline Capital Management allocated the biggest weight to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), around 1.85% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, designating 1.04 percent of its 13F equity portfolio to RARE.
Now, key hedge funds were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, established the most outsized position in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). Laurion Capital Management had $1.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.6 million investment in the stock during the quarter. The other funds with brand new RARE positions are Dmitry Balyasny’s Balyasny Asset Management and Israel Englander’s Millennium Management.
Let’s check out hedge fund activity in other stocks similar to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). We will take a look at Yelp Inc (NYSE:YELP), Carpenter Technology Corporation (NYSE:CRS), Vishay Intertechnology, Inc. (NYSE:VSH), and Atlantica Yield plc (NASDAQ:AY). All of these stocks’ market caps resemble RARE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YELP | 26 | 417929 | -1 |
| CRS | 13 | 72105 | 1 |
| VSH | 19 | 323885 | 0 |
| AY | 19 | 152882 | 1 |
| Average | 19.25 | 241700 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $187 million in RARE’s case. Yelp Inc (NYSE:YELP) is the most popular stock in this table. On the other hand Carpenter Technology Corporation (NYSE:CRS) is the least popular one with only 13 bullish hedge fund positions. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately RARE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RARE investors were disappointed as the stock returned -7.3% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
