Pharmaceutical company Radius Health Inc (NASDAQ:RDUS), which concentrates on developing products designed to treat osteoporosis, saw its shares rise by more than 15% yesterday following the release of positive clinical data related to its investigational drug abaloparatide. According to Radius Health Inc (NASDAQ:RDUS), these trials show that the drug has met the primary and secondary endpoints, which are necessary to help it prepare the drug for regulatory submission. While Radius is making its effort to enter a big market, investors should keep in mind that Radius is still a high-risk company which is currently burning more than $60 million in operating cash per year as it works to develop abaloparatide.
Pressmaster/Shutterstock.com
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 142% and beating the market by more than 84 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
In today’s marketplace there are plenty of gauges shareholders can use to assess publicly traded companies. A couple of the lesser known gauges are hedge fund and insider trading activity. Experts at Insider Monkey, a website specializing in hedge funds, has shown that historically, those who follow the top picks of the top money managers can outclass their index-focused peers by a very impressive margin. Let’s look first at the recent insider trading activity, which we see was relatively neutral. There were no recorded insider sales, and the only insider purchases were made by a large institutional shareholder, not a company executive, so we don’t consider those insider purchases to be as strong an indicator.
Let’s take a look at the latest hedge fund activities on Radius Health Inc (NASDAQ:RDUS) now.
How have hedgies been trading Radius Health Inc (NASDAQ:RDUS)?
At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a big gain of 111% from the end of the fourth quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly.
Of the funds tracked by Insider Monkey, Brookside Capital had the biggest position in Radius Health Inc with shares worth $93 million comprising 2.34% of its total 13F portfolio. The second largest stake is held by Steve Cohen‘s Point72 Asset Management, L.P. with shares worth $49 million comprising 0.34% of its total 13F portfolio, followed by Thomas Steyer’s Farallon Capital and Partner Fund Management. Likewise, there were some funds taking up new positions in the stock, with the largest new position belonging to Jason Karp‘s Tourbillon Capital Partners, consisting of 325,000 shares with a value of $13.38 million. Jim Simons’ Renaissance Technologies has the next largest new position, of 133,000 shares.
If we look ahead, we might see that analysts are bullish on the potential for abaloparatide, and the highest level of sales estimates are pretty close to or maybe a little above a billion dollars. Radius Health Inc (NASDAQ:RDUS) will have to do a lot before it can earn any revenue from this drug but today’s announcement is certainly a good sign for the company. Investors should keep in mind that Radius is still a high-risk company which is currently burning more than $60 million in operating cash per year as it works to develop abaloparatide.
So with Radius making a strong effort to enter a big market, and insider and hedge fund sentiment being slightly positive, we give a cautious ‘Buy’ recommendation on the stock.
Disclosure: None