Is Retrophin Inc (NASDAQ:RTRX) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Retrophin Inc (NASDAQ:RTRX) ready to rally soon? Prominent investors are becoming more confident. The number of bullish hedge fund bets went up by 3 in recent months. Our calculations also showed that RTRX isn’t among the 30 most popular stocks among hedge funds. RTRX was in 22 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with RTRX positions at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s analyze the fresh hedge fund action encompassing Retrophin Inc (NASDAQ:RTRX).
How have hedgies been trading Retrophin Inc (NASDAQ:RTRX)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the second quarter of 2018. By comparison, 16 hedge funds held shares or bullish call options in RTRX heading into this year. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
The largest stake in Retrophin Inc (NASDAQ:RTRX) was held by Scopia Capital, which reported holding $187.3 million worth of stock at the end of September. It was followed by Consonance Capital Management with a $112.5 million position. Other investors bullish on the company included Perceptive Advisors, Broadfin Capital, and Point72 Asset Management.
Now, some big names have jumped into Retrophin Inc (NASDAQ:RTRX) headfirst. Ghost Tree Capital, managed by Ken Greenberg and David Kim, established the largest position in Retrophin Inc (NASDAQ:RTRX). Ghost Tree Capital had $10.1 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $3.5 million investment in the stock during the quarter. The other funds with brand new RTRX positions are Jeffrey Talpins’s Element Capital Management and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
Let’s go over hedge fund activity in other stocks similar to Retrophin Inc (NASDAQ:RTRX). We will take a look at TriCo Bancshares (NASDAQ:TCBK), Weis Markets, Inc. (NYSE:WMK), Astec Industries, Inc. (NASDAQ:ASTE), and CorePoint Lodging Inc. (NYSE:CPLG). This group of stocks’ market values resemble RTRX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCBK | 11 | 46732 | 0 |
| WMK | 15 | 89216 | 1 |
| ASTE | 10 | 126988 | 3 |
| CPLG | 23 | 239001 | 3 |
| Average | 14.75 | 125484 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $482 million in RTRX’s case. CorePoint Lodging Inc. (NYSE:CPLG) is the most popular stock in this table. On the other hand Astec Industries, Inc. (NASDAQ:ASTE) is the least popular one with only 10 bullish hedge fund positions. Retrophin Inc (NASDAQ:RTRX) 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 CPLG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
