Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) investors should be aware of a decrease in support from the world’s most elite money managers lately. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was in 24 hedge funds’ portfolios at the end of September. The all time high for this statistic is 32. There were 32 hedge funds in our database with RARE positions at the end of the second quarter. Our calculations also showed that RARE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Kris Jenner of Rock Springs Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s analyze the recent hedge fund action encompassing Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Do Hedge Funds Think RARE Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in RARE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Alkeon Capital Management was the largest shareholder of Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), with a stake worth $208.2 million reported as of the end of September. Trailing Alkeon Capital Management was Citadel Investment Group, which amassed a stake valued at $133.8 million. Rock Springs Capital Management, Adage Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rock Springs Capital Management allocated the biggest weight to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), around 1.52% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, earmarking 0.79 percent of its 13F equity portfolio to RARE.
Because Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few hedgies who sold off their full holdings by the end of the third quarter. At the top of the heap, Michael Gelband’s ExodusPoint Capital sold off the largest stake of all the hedgies watched by Insider Monkey, valued at about $3.1 million in stock. McKinley Capital Management, also dropped its stock, about $2.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). These stocks are Amkor Technology, Inc. (NASDAQ:AMKR), STAAR Surgical Company (NASDAQ:STAA), INMODE LTD. (NASDAQ:INMD), Fox Factory Holding Corp (NASDAQ:FOXF), Inovalon Holdings Inc (NASDAQ:INOV), Joby Aviation Inc. (NYSE:JOBY), and Lumentum Holdings Inc (NASDAQ:LITE). This group of stocks’ market values are closest to RARE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMKR | 25 | 208350 | 6 |
| STAA | 26 | 1399899 | 0 |
| INMD | 29 | 524139 | 3 |
| FOXF | 18 | 78501 | 4 |
| INOV | 27 | 382693 | 7 |
| JOBY | 21 | 231850 | 21 |
| LITE | 33 | 408768 | 4 |
| Average | 25.6 | 462029 | 6.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $462 million. That figure was $639 million in RARE’s case. Lumentum Holdings Inc (NASDAQ:LITE) is the most popular stock in this table. On the other hand Fox Factory Holding Corp (NASDAQ:FOXF) is the least popular one with only 18 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. Our overall hedge fund sentiment score for RARE is 39.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately RARE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RARE investors were disappointed as the stock returned -13% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)
Follow Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)
Suggested Articles:
- 10 Best Financial Advisory Firms To Buy Now
- 10 Best TSX Stocks to Buy Right Now
- 10 Best Augmented Reality Stocks to Buy Now
Disclosure: None. This article was originally published at Insider Monkey.
