You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) a buy right now? Investors who are in the know are getting less optimistic. The number of long hedge fund bets shrunk by 2 recently. Our calculations also showed that IRWD isn’t among the 30 most popular stocks among hedge funds (see the video below). IRWD was in 21 hedge funds’ portfolios at the end of the second quarter of 2019. There were 23 hedge funds in our database with IRWD positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are seen as underperforming, old investment vehicles of the past. While there are greater than 8000 funds in operation today, Our researchers hone in on the elite of this club, approximately 750 funds. These investment experts manage most of the smart money’s total asset base, and by shadowing their inimitable equity investments, Insider Monkey has uncovered numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the key hedge fund action surrounding Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).
How are hedge funds trading Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD)?
Heading into the third quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the first quarter of 2019. On the other hand, there were a total of 16 hedge funds with a bullish position in IRWD a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Sarissa Capital Management was the largest shareholder of Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), with a stake worth $106.3 million reported as of the end of March. Trailing Sarissa Capital Management was MFN Partners, which amassed a stake valued at $54 million. EcoR1 Capital, Citadel Investment Group, and Adage Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that elected to cut their positions entirely by the end of the second quarter. Intriguingly, Roberto Mignone’s Bridger Management dumped the biggest stake of the 750 funds followed by Insider Monkey, worth close to $56.6 million in call options. Oleg Nodelman’s fund, EcoR1 Capital, also dropped its call options, about $14.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks similar to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). We will take a look at Silicon Motion Technology Corporation (NASDAQ:SIMO), SSR Mining Inc. (NASDAQ:SSRM), Newmark Group, Inc. (NASDAQ:NMRK), and Sogou Inc. (NYSE:SOGO). 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 |
|---|---|---|---|
| SIMO | 12 | 141488 | -1 |
| SSRM | 16 | 139260 | 3 |
| NMRK | 16 | 102144 | -8 |
| SOGO | 5 | 1243 | -3 |
| Average | 12.25 | 96034 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $306 million in IRWD’s case. SSR Mining Inc. (NASDAQ:SSRM) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately IRWD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IRWD were disappointed as the stock returned -21.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
