Amid an overall bull market, many stocks that smart money investors were collectively bullish on 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. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.6% in 2019 (through the end of November) and outperformed the broader market benchmark by 9.9 percentage points. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Rockwell Medical Inc (NASDAQ:RMTI) a healthy stock for your portfolio? Money managers are getting less bullish. The number of long hedge fund positions shrunk by 6 recently. Our calculations also showed that RMTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). RMTI was in 5 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with RMTI positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are tons of gauges shareholders use to evaluate their holdings. A duo of the most useful gauges is hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outpace their index-focused peers by a healthy margin (see the details here).
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example, Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to review the new hedge fund action surrounding Rockwell Medical Inc (NASDAQ:RMTI).
How have hedgies been trading Rockwell Medical Inc (NASDAQ:RMTI)?
At Q3’s end, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -55% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RMTI over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Manatuck Hill Partners held the most valuable stake in Rockwell Medical Inc (NASDAQ:RMTI), which was worth $0.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $0.3 million worth of shares. SCW Capital Management, Citadel Investment Group, and Tudor Investment Corp 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, SCW Capital Management allocated the biggest weight to Rockwell Medical Inc (NASDAQ:RMTI), around 0.22% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, setting aside 0.19 percent of its 13F equity portfolio to RMTI.
Judging by the fact that Rockwell Medical Inc (NASDAQ:RMTI) has experienced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that slashed their entire stakes heading into Q4. Intriguingly, Joseph Edelman’s Perceptive Advisors said goodbye to the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth close to $4.5 million in stock, and Jonathan Barrett and Paul Segal’s Luminus Management was right behind this move, as the fund dumped about $1.3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 6 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rockwell Medical Inc (NASDAQ:RMTI) but similarly valued. These stocks are Zynerba Pharmaceuticals Inc (NASDAQ:ZYNE), AcelRx Pharmaceuticals Inc (NASDAQ:ACRX), Hi-Crush Inc. (NYSE:HCR), and Ohio Valley Banc Corp. (NASDAQ:OVBC). This group of stocks’ market valuations is similar to RMTI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZYNE | 4 | 7852 | 1 |
| ACRX | 5 | 2657 | -1 |
| HCR | 3 | 2694 | 0 |
| OVBC | 1 | 1839 | 0 |
| Average | 3.25 | 3761 | 0 |
View the table here if you experience formatting issues.
As you can see these stocks had an average of 3.25 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $1 million in RMTI’s case. AcelRx Pharmaceuticals Inc (NASDAQ:ACRX) is the most popular stock in this table. On the other hand, Ohio Valley Banc Corp. (NASDAQ:OVBC) is the least popular one with only 1 bullish hedge fund positions. Rockwell Medical Inc (NASDAQ:RMTI) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately, RMTI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RMTI were disappointed as the stock returned -17.4% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.
