How do we determine whether Regulus Therapeutics Inc (NASDAQ:RGLS) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Regulus Therapeutics Inc (NASDAQ:RGLS) has seen a decrease in enthusiasm from smart money lately. Our calculations also showed that RGLS 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Alex Denner of Sarissa Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s check out the recent hedge fund action surrounding Regulus Therapeutics Inc (NASDAQ:RGLS).
How are hedge funds trading Regulus Therapeutics Inc (NASDAQ:RGLS)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in RGLS over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Biotechnology Value Fund, managed by Mark Lampert, holds the biggest position in Regulus Therapeutics Inc (NASDAQ:RGLS). Biotechnology Value Fund has a $1.5 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Alex Denner of Sarissa Capital Management, with a $1.3 million position; 0.2% of its 13F portfolio is allocated to the stock. Other peers that hold long positions contain Oleg Nodelman’s EcoR1 Capital, Renaissance Technologies and . In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Regulus Therapeutics Inc (NASDAQ:RGLS), around 0.17% of its 13F portfolio. Biotechnology Value Fund is also relatively very bullish on the stock, setting aside 0.15 percent of its 13F equity portfolio to RGLS.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Samsara BioCapital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified RGLS as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks similar to Regulus Therapeutics Inc (NASDAQ:RGLS). These stocks are Check-Cap Ltd. (NASDAQ:CHEK), My Size, Inc. (NASDAQ:MYSZ), Eltek Ltd. (NASDAQ:ELTK), and aTyr Pharma, Inc. (NASDAQ:LIFE). This group of stocks’ market valuations match RGLS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHEK | 4 | 1289 | 0 |
| MYSZ | 1 | 21 | 0 |
| ELTK | 1 | 75 | 0 |
| LIFE | 2 | 1480 | -1 |
| Average | 2 | 716 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $4 million in RGLS’s case. Check-Cap Ltd. (NASDAQ:CHEK) is the most popular stock in this table. On the other hand My Size, Inc. (NASDAQ:MYSZ) is the least popular one with only 1 bullish hedge fund positions. Regulus Therapeutics Inc (NASDAQ:RGLS) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on RGLS as the stock returned 15.3% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
