Hedge Funds Are Dumping Ultragenyx Pharmaceutical Inc (RARE)

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) , and what that likely means for the prospects of the company and its stock.

Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) investors should pay attention to a decrease in hedge fund sentiment in recent months. There were 19 hedge funds in our database with RARE positions at the end of the previous quarter. At the end of this article we will also compare RARE to other stocks including Urban Edge Properties (NYSE:UE), PIMCO Dynamic Credit Income Fund (NYSE:PCI), and Metals USA Holdings Corp (NYSE:MUSA) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Hedge fund activity in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE)

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RARE over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management holds the number one position in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), having a $48.1 million invested in the stock. Coming in second is Brian Ashford-Russell and Tim Woolley of Polar Capital, with a $17.1 million position. Some other peers with similar optimism comprise Matthew A. Weatherbie’s Weatherbie Capital, Stuart Weisbrod’s Iguana Healthcare Management and Samuel Isaly’s OrbiMed Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. Interestingly, Ken Griffin’s Citadel Investment Group dumped the largest position of the 700 funds followed by Insider Monkey, valued at close to $0.5 million in call options. Glenn Russell Dubin’s fund, Highbridge Capital Management, also dumped its stock, about $0.4 million worth.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) but similarly valued. We will take a look at Urban Edge Properties (NYSE:UE), PIMCO Dynamic Credit Income Fund (NYSE:PCI), Metals USA Holdings Corp (NYSE:MUSA), and ProAssurance Corporation (NYSE:PRA). This group of stocks’ market valuations resemble RARE’s market valuation.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $163 million in RARE’s case. Metals USA Holdings Corp (NYSE:MUSA) is the most popular stock in this table. On the other hand PIMCO Dynamic Credit Income Fund (NYSE:PCI) is the least popular one with only 3 bullish hedge fund positions. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MUSA might be a better candidate to consider taking a long position in.

Disclosure: None