We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Radius Health Inc (NASDAQ:RDUS).
Is Radius Health Inc (NASDAQ:RDUS) a good investment today? Hedge funds are becoming more confident. The number of bullish hedge fund positions increased by 2 recently. Our calculations also showed that RDUS 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.
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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David E. Shaw of D.E. Shaw
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the recent hedge fund action regarding Radius Health Inc (NASDAQ:RDUS).
What does smart money think about Radius Health Inc (NASDAQ:RDUS)?
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards RDUS over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Israel Englander’s Millennium Management has the largest position in Radius Health Inc (NASDAQ:RDUS), worth close to $65.1 million, amounting to 0.1% of its total 13F portfolio. The second most bullish fund manager is Farallon Capital, with a $52.9 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include David Rosen’s Rubric Capital Management, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management and David E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Rubric Capital Management allocated the biggest weight to Radius Health Inc (NASDAQ:RDUS), around 3.17% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, designating 2.77 percent of its 13F equity portfolio to RDUS.
As aggregate interest increased, specific money managers have jumped into Radius Health Inc (NASDAQ:RDUS) headfirst. Two Sigma Advisors, managed by John Overdeck and David Siegel, created the most outsized position in Radius Health Inc (NASDAQ:RDUS). Two Sigma Advisors had $4.6 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $2.8 million position during the quarter. The other funds with new positions in the stock are James A. Silverman’s Opaleye Management, Michael Gelband’s ExodusPoint Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s also examine hedge fund activity in other stocks similar to Radius Health Inc (NASDAQ:RDUS). We will take a look at Compass Diversified Holdings LLC (NYSE:CODI), Brookline Bancorp, Inc. (NASDAQ:BRKL), Enanta Pharmaceuticals Inc (NASDAQ:ENTA), and Kearny Financial Corp. (NASDAQ:KRNY). This group of stocks’ market caps are closest to RDUS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CODI | 5 | 4549 | 0 |
| BRKL | 11 | 59263 | 3 |
| ENTA | 16 | 200896 | -4 |
| KRNY | 16 | 132793 | 3 |
| Average | 12 | 99375 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $269 million in RDUS’s case. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is the most popular stock in this table. On the other hand Compass Diversified Holdings LLC (NYSE:CODI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Radius Health Inc (NASDAQ:RDUS) 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. Unfortunately RDUS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RDUS were disappointed as the stock returned -13% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
