Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (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. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was in 18 hedge funds’ portfolios at the end of the fourth quarter of 2019. RARE shareholders have witnessed a decrease in hedge fund interest in recent months. There were 19 hedge funds in our database with RARE positions at the end of the previous quarter. Our calculations also showed that RARE 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).
If you’d ask most market participants, hedge funds are perceived as slow, outdated investment tools of years past. While there are over 8000 funds with their doors open today, We look at the upper echelon of this club, approximately 850 funds. Most estimates calculate that this group of people command the lion’s share of the hedge fund industry’s total asset base, and by tracking their top stock picks, Insider Monkey has deciphered several investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy outstripped 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 .
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 review the latest hedge fund action regarding Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
How have hedgies been trading Ultragenyx Pharmaceutical Inc (NASDAQ:RARE)?
Heading into the first quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in RARE over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was held by Citadel Investment Group, which reported holding $64 million worth of stock at the end of September. It was followed by Alkeon Capital Management with a $59 million position. Other investors bullish on the company included Rock Springs Capital Management, D E Shaw, and Hudson Bay Capital Management. In terms of the portfolio weights assigned to each position EcoR1 Capital allocated the biggest weight to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), around 1.02% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 0.94 percent of its 13F equity portfolio to RARE.
Because Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) has experienced declining sentiment from hedge fund managers, it’s safe to say that there exists a select few money managers that decided to sell off their full holdings last quarter. It’s worth mentioning that Samuel Isaly’s OrbiMed Advisors said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, comprising close to $35.7 million in stock. Jacob Doft’s fund, Highline Capital Management, also dropped its stock, about $12.6 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) but similarly valued. These stocks are Herman Miller, Inc. (NASDAQ:MLHR), American Eagle Outfitters Inc. (NYSE:AEO), Albany International Corp. (NYSE:AIN), and Golub Capital BDC Inc (NASDAQ:GBDC). This group of stocks’ market values match RARE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MLHR | 24 | 213274 | -4 |
| AEO | 24 | 297377 | -5 |
| AIN | 19 | 96389 | 5 |
| GBDC | 16 | 117101 | 4 |
| Average | 20.75 | 181035 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $181 million. That figure was $210 million in RARE’s case. Herman Miller, Inc. (NASDAQ:MLHR) is the most popular stock in this table. On the other hand Golub Capital BDC Inc (NASDAQ:GBDC) is the least popular one with only 16 bullish hedge fund positions. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is not the least popular stock in this group but hedge fund interest is still below average. 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 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on RARE as the stock returned -0.6% during the same time period and outperformed the market by an even larger margin.
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.
