Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The one and a half month time period since the end of the third quarter is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Radius Health Inc (NASDAQ:RDUS).
Radius Health Inc (NASDAQ:RDUS) was in 24 hedge funds’ portfolios at the end of the third quarter of 2018. RDUS has experienced an increase in enthusiasm from smart money in recent months. There were 15 hedge funds in our database with RDUS positions at the end of the previous quarter. Our calculations also showed that RDUS 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.
Let’s take a glance at the recent hedge fund action encompassing Radius Health Inc (NASDAQ:RDUS).
Hedge fund activity in Radius Health Inc (NASDAQ:RDUS)
Heading into the fourth quarter of 2018, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in RDUS heading into this year. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Radius Health Inc (NASDAQ:RDUS) was held by Healthcor Management LP, which reported holding $63.8 million worth of stock at the end of September. It was followed by Millennium Management with a $38.5 million position. Other investors bullish on the company included Farallon Capital, Citadel Investment Group, and Rock Springs Capital Management.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Armistice Capital, managed by Steven Boyd, initiated the most outsized position in Radius Health Inc (NASDAQ:RDUS). Armistice Capital had $11.7 million invested in the company at the end of the quarter. David Rosen’s Rubric Capital Management also made a $4.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Greenberg and David Kim’s Ghost Tree Capital, Benjamin A. Smith’s Laurion Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Radius Health Inc (NASDAQ:RDUS) but similarly valued. We will take a look at Turning Point Brands, Inc. (NYSE:TPB), AngioDynamics, Inc. (NASDAQ:ANGO), Flaherty & Crumrine Preferred Securities Income Fund Inc. (NYSE:FFC), and Ituran Location and Control Ltd. (US) (NASDAQ:ITRN). All of these stocks’ market caps are closest to RDUS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPB | 10 | 40587 | 1 |
| ANGO | 15 | 66202 | 1 |
| FFC | 1 | 19 | 1 |
| ITRN | 10 | 86544 | 2 |
| Average | 9 | 48338 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $292 million in RDUS’s case. AngioDynamics, Inc. (NASDAQ:ANGO) is the most popular stock in this table. On the other hand 0 is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Radius Health Inc (NASDAQ:RDUS) 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.
