We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Tricida, Inc. (NASDAQ:TCDA) in this article.
Tricida, Inc. (NASDAQ:TCDA) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2019. TCDA has seen an increase in support from the world’s most elite money managers recently. There were 17 hedge funds in our database with TCDA holdings at the end of the previous quarter. Our calculations also showed that TCDA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most stock holders, hedge funds are seen as slow, outdated financial vehicles of the past. While there are more than 8000 funds trading today, We look at the aristocrats of this group, about 850 funds. These investment experts have their hands on the majority of the hedge fund industry’s total asset base, and by following their unrivaled investments, Insider Monkey has spotted a few investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Felix Baker of Baker Bros.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action regarding Tricida, Inc. (NASDAQ:TCDA).
What does smart money think about Tricida, Inc. (NASDAQ:TCDA)?
At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 41% from the third quarter of 2019. By comparison, 13 hedge funds held shares or bullish call options in TCDA a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Among these funds, OrbiMed Advisors held the most valuable stake in Tricida, Inc. (NASDAQ:TCDA), which was worth $362.8 million at the end of the third quarter. On the second spot was Redmile Group which amassed $80.4 million worth of shares. Baker Bros. Advisors, venBio Select Advisor, and Farallon Capital 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 OrbiMed Advisors allocated the biggest weight to Tricida, Inc. (NASDAQ:TCDA), around 5.18% of its 13F portfolio. Vivo Capital is also relatively very bullish on the stock, earmarking 2.13 percent of its 13F equity portfolio to TCDA.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Duquesne Capital, managed by Stanley Druckenmiller, created the biggest position in Tricida, Inc. (NASDAQ:TCDA). Duquesne Capital had $26 million invested in the company at the end of the quarter. Jonathan Barrett and Paul Segal’s Luminus Management also made a $5.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Christiana Goh Bardon’s Burrage Capital Management, Renaissance Technologies, and D. E. Shaw’s D E Shaw.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Tricida, Inc. (NASDAQ:TCDA) but similarly valued. We will take a look at Redwood Trust, Inc. (NYSE:RWT), Group 1 Automotive, Inc. (NYSE:GPI), Portola Pharmaceuticals Inc (NASDAQ:PTLA), and Progress Software Corporation (NASDAQ:PRGS). This group of stocks’ market caps are closest to TCDA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RWT | 13 | 95921 | -5 |
| GPI | 22 | 173892 | 1 |
| PTLA | 27 | 221821 | 4 |
| PRGS | 20 | 222597 | -2 |
| Average | 20.5 | 178558 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $780 million in TCDA’s case. Portola Pharmaceuticals Inc (NASDAQ:PTLA) is the most popular stock in this table. On the other hand Redwood Trust, Inc. (NYSE:RWT) is the least popular one with only 13 bullish hedge fund positions. Tricida, Inc. (NASDAQ:TCDA) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately TCDA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TCDA were disappointed as the stock returned -34.3% during the same time period 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 so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
