Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Tricida, Inc. (NASDAQ:TCDA) undervalued? The best stock pickers are taking an optimistic view. The number of long hedge fund bets increased by 3 in recent months. Our calculations also showed that TCDA isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We’re going to analyze the recent hedge fund action surrounding Tricida, Inc. (NASDAQ:TCDA).
How are hedge funds trading Tricida, Inc. (NASDAQ:TCDA)?
At Q2’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in TCDA a year ago. So, let’s find out 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, Samuel Isaly’s OrbiMed Advisors has the number one position in Tricida, Inc. (NASDAQ:TCDA), worth close to $438.6 million, corresponding to 6.8% of its total 13F portfolio. The second largest stake is held by Behzad Aghazadeh of venBio Select Advisor, with a $86.8 million position; the fund has 3% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish comprise Julian Baker and Felix Baker’s Baker Bros. Advisors, Jeremy Green’s Redmile Group and Albert Cha and Frank Kung’s Vivo Capital.
As aggregate interest increased, some big names were leading the bulls’ herd. Great Point Partners, managed by Jeffrey Jay and David Kroin, assembled the biggest position in Tricida, Inc. (NASDAQ:TCDA). Great Point Partners had $56.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $3.8 million investment in the stock during the quarter. The following funds were also among the new TCDA investors: Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw, and Renaissance Technologies.
Let’s now review hedge fund activity in other stocks similar to Tricida, Inc. (NASDAQ:TCDA). We will take a look at Natera Inc (NASDAQ:NTRA), Banner Corporation (NASDAQ:BANR), Advanced Drainage Systems, Inc. (NYSE:WMS), and Four Corners Property Trust, Inc. (NYSE:FCPT). This group of stocks’ market values resemble TCDA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NTRA | 20 | 242886 | 2 |
| BANR | 16 | 87634 | -2 |
| WMS | 17 | 325568 | 0 |
| FCPT | 21 | 108307 | 8 |
| Average | 18.5 | 191099 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $191 million. That figure was $904 million in TCDA’s case. Four Corners Property Trust, Inc. (NYSE:FCPT) is the most popular stock in this table. On the other hand Banner Corporation (NASDAQ:BANR) is the least popular one with only 16 bullish hedge fund positions. Tricida, Inc. (NASDAQ:TCDA) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 TCDA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TCDA investors were disappointed as the stock returned -21.8% 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 so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
