Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Reata Pharmaceuticals, Inc. (NASDAQ:RETA) based on that data.
Reata Pharmaceuticals, Inc. (NASDAQ:RETA) investors should pay attention to an increase in hedge fund sentiment recently. Our calculations also showed that RETA 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.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing Reata Pharmaceuticals, Inc. (NASDAQ:RETA).
How have hedgies been trading Reata Pharmaceuticals, Inc. (NASDAQ:RETA)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the second quarter of 2019. By comparison, 17 hedge funds held shares or bullish call options in RETA 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.
Of the funds tracked by Insider Monkey, Bihua Chen’s Cormorant Asset Management has the largest position in Reata Pharmaceuticals, Inc. (NASDAQ:RETA), worth close to $65.8 million, comprising 4% of its total 13F portfolio. On Cormorant Asset Management’s heels is Steve Cohen of Point72 Asset Management, with a $28.9 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Richard Driehaus’s Driehaus Capital, James E. Flynn’s Deerfield Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to Reata Pharmaceuticals, Inc. (NASDAQ:RETA), around 4.01% of its 13F portfolio. Prosight Capital is also relatively very bullish on the stock, dishing out 2.79 percent of its 13F equity portfolio to RETA.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Duquesne Capital, managed by Stanley Druckenmiller, established the biggest position in Reata Pharmaceuticals, Inc. (NASDAQ:RETA). Duquesne Capital had $13.9 million invested in the company at the end of the quarter. David Greenspan’s Slate Path Capital also made a $9.6 million investment in the stock during the quarter. The following funds were also among the new RETA investors: Robert Pohly’s Samlyn Capital, Ken Greenberg and David Kim’s Ghost Tree Capital, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Reata Pharmaceuticals, Inc. (NASDAQ:RETA) but similarly valued. These stocks are Simmons First National Corporation (NASDAQ:SFNC), Lexington Realty Trust (NYSE:LXP), ABM Industries Incorporated (NYSE:ABM), and Argo Group International Holdings, Ltd. (NYSE:ARGO). This group of stocks’ market caps are similar to RETA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SFNC | 10 | 31824 | -2 |
| LXP | 13 | 108269 | 1 |
| ABM | 14 | 53080 | 4 |
| ARGO | 15 | 196940 | -4 |
| Average | 13 | 97528 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $212 million in RETA’s case. Argo Group International Holdings, Ltd. (NYSE:ARGO) is the most popular stock in this table. On the other hand Simmons First National Corporation (NASDAQ:SFNC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is more popular among hedge funds. 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 RETA as the stock returned 143% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
