Is Ultragenyx Pharmaceutical Inc (RARE) Going to Burn These Hedge Funds?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) a splendid investment right now? The smart money is betting on the stock. The number of long hedge fund bets advanced by 1 lately. RARE was in 25 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with RARE holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Validus Holdings, Ltd. (NYSE:VR), Guidewire Software Inc (NYSE:GWRE), and Colfax Corp (NYSE:CFX) to gather more data points.

In the eyes of most market participants, hedge funds are perceived as worthless, outdated financial vehicles of the past. While there are over 8000 funds trading at present, Our researchers choose to focus on the bigwigs of this club, around 700 funds. Most estimates calculate that this group of people orchestrate most of the hedge fund industry’s total capital, and by tracking their unrivaled picks, Insider Monkey has revealed several investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to go over the key action surrounding Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).

How have hedgies been trading Ultragenyx Pharmaceutical Inc (NASDAQ:RARE)?

At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a small change of 4% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Visium Asset Management, managed by Jacob Gottlieb, holds the most valuable position in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). Visium Asset Management has an $60.8 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which holds an $52.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Matthew A. Weatherbie’s Weatherbie Capital.

Now, key money managers have jumped into Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) headfirst. Columbus Circle Investors, managed by Clifford Fox, established the biggest position in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). Columbus Circle Investors had $14.5 million invested in the company at the end of the quarter. Peter Kolchinsky’s RA Capital Management also initiated an $5.4 million position during the quarter. The other funds with new positions in the stock are David Costen Haley’s HBK Investments, D. E. Shaw’s D E Shaw, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks similar to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). These stocks are Validus Holdings, Ltd. (NYSE:VR), Guidewire Software Inc (NYSE:GWRE), Colfax Corp (NYSE:CFX), and CPFL Energia S.A. (ADR) (NYSE:CPL). This group of stocks’ market caps match RARE’s market cap.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $331 million in RARE’s case. Colfax Corp (NYSE:CFX) is the most popular stock in this table, while CPFL Energia S.A. (ADR) (NYSE:CPL) is the least popular one with only 6 bullish hedge fund positions. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) 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. In this regard CFX might be a better candidate to consider a long position.