It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ignyta Inc (NASDAQ:RXDX).
Ignyta Inc (NASDAQ:RXDX) investors should pay attention to a decrease in the hedge fund interest of late. RXDX was in 12 hedge funds’ portfolios at the end of the third quarter of 2015. There were 18 hedge funds in our database with RXDX positions at the end of the previous quarter. At the end of this article we will also compare RXDX to other stocks, including Hovnanian Enterprises, Inc. (NYSE:HOV), Cytokinetics, Inc. (NASDAQ:CYTK), and PowerSecure International, Inc. (NYSE:POWR) to get a better sense of its popularity.
Follow Ignyta Inc. (NASDAQ:RXDX)
Follow Ignyta Inc. (NASDAQ:RXDX)
In the financial world, there are numerous indicators shareholders can use to grade their stock investments. A pair of the most underrated indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the top fund managers can trounce their index-focused peers by a solid margin (see the details here).
With all of this in mind, let’s review the key action surrounding Ignyta Inc (NASDAQ:RXDX).
How have hedgies been trading Ignyta Inc (NASDAQ:RXDX)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a decrease of 33% from the previous quarter. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Broadfin Capital, managed by Kevin Kotler, holds the most valuable position in Ignyta Inc (NASDAQ:RXDX). Broadfin Capital has an $19.8 million position in the stock, comprising 1.1% of its 13F portfolio. Sitting at the No. 2 spot is Joseph Edelman’s Perceptive Advisors, with a $17 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions consist of Israel Englander’s Millennium Management, Steven Boyd’s Armistice Capital, and Michael Castor’s Sio Capital.
Seeing as Ignyta Inc (NASDAQ:RXDX) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedge funds that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Thomas Bailard’s Bailard Inc dumped the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $1.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $1.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ignyta Inc (NASDAQ:RXDX) but similarly valued. These stocks are Hovnanian Enterprises, Inc. (NYSE:HOV), Cytokinetics, Inc. (NASDAQ:CYTK), PowerSecure International, Inc. (NYSE:POWR), and Cohu, Inc. (NASDAQ:COHU). This group of stocks’ market valuations are closest to RXDX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HOV | 16 | 37867 | 5 |
| CYTK | 17 | 47150 | 4 |
| POWR | 10 | 12468 | -4 |
| COHU | 14 | 18149 | 1 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $29 million, lower than the $80 million in RXDX’s case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table. On the other hand PowerSecure International, Inc. (NYSE:POWR) is the least popular one with only 10 bullish hedge fund positions. Ignyta Inc (NASDAQ:RXDX) 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. In this regard CYTK might be a better candidate to consider a long position.
