Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).
Is Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) a superb investment today? The smart money is in an optimistic mood. The number of long hedge fund positions advanced by 1 lately. Our calculations also showed that irwd isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to review the new hedge fund action encompassing Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).
What have hedge funds been doing with Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2018. On the other hand, there were a total of 17 hedge funds with a bullish position in IRWD at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, EcoR1 Capital was the largest shareholder of Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), with a stake worth $94.9 million reported as of the end of September. Trailing EcoR1 Capital was Sarissa Capital Management, which amassed a stake valued at $62.2 million. OrbiMed Advisors, Adage Capital Management, and Park West Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, some big names were leading the bulls’ herd. Bridger Management, managed by Roberto Mignone, initiated the biggest position in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). Bridger Management had $11.5 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $2.4 million position during the quarter. The following funds were also among the new IRWD investors: Paul Tudor Jones’s Tudor Investment Corp, John Overdeck and David Siegel’s Two Sigma Advisors, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
Let’s also examine hedge fund activity in other stocks similar to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). These stocks are Stantec Inc. (NYSE:STN), Watts Water Technologies Inc (NYSE:WTS), J&J Snack Foods Corp. (NASDAQ:JJSF), and Omnicell, Inc. (NASDAQ:OMCL). This group of stocks’ market valuations match IRWD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STN | 5 | 82481 | 0 |
| WTS | 15 | 351313 | 2 |
| JJSF | 10 | 85668 | 1 |
| OMCL | 5 | 33391 | -2 |
| Average | 8.75 | 138213 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $317 million in IRWD’s case. Watts Water Technologies Inc (NYSE:WTS) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
