Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Rubius Therapeutics, Inc. (NASDAQ:RUBY)? The smart money sentiment can provide an answer to this question.
Hedge fund interest in Rubius Therapeutics, Inc. (NASDAQ:RUBY) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare RUBY to other stocks including OFG Bancorp (NYSE:OFG), Winnebago Industries, Inc. (NYSE:WGO), and Michaels Companies Inc (NASDAQ:MIK) to get a better sense of its popularity. Our calculations also showed that RUBY isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the fresh hedge fund action regarding Rubius Therapeutics, Inc. (NASDAQ:RUBY).
How have hedgies been trading Rubius Therapeutics, Inc. (NASDAQ:RUBY)?
Heading into the third quarter of 2019, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RUBY over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Cormorant Asset Management was the largest shareholder of Rubius Therapeutics, Inc. (NASDAQ:RUBY), with a stake worth $9.4 million reported as of the end of March. Trailing Cormorant Asset Management was EcoR1 Capital, which amassed a stake valued at $7.3 million. Citadel Investment Group, Millennium Management, and Springbok Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Rubius Therapeutics, Inc. (NASDAQ:RUBY) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds that slashed their full holdings in the second quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest stake of the 750 funds followed by Insider Monkey, totaling an estimated $1.4 million in stock, and Warren Lammert’s Granite Point Capital was right behind this move, as the fund cut about $0.7 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rubius Therapeutics, Inc. (NASDAQ:RUBY) but similarly valued. These stocks are OFG Bancorp (NYSE:OFG), Winnebago Industries, Inc. (NYSE:WGO), Michaels Companies Inc (NASDAQ:MIK), and Diamond Offshore Drilling Inc (NYSE:DO). All of these stocks’ market caps are similar to RUBY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OFG | 18 | 84829 | -2 |
| WGO | 13 | 109505 | -2 |
| MIK | 26 | 56812 | -6 |
| DO | 13 | 64277 | -5 |
| Average | 17.5 | 78856 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $22 million in RUBY’s case. Michaels Companies Inc (NASDAQ:MIK) is the most popular stock in this table. On the other hand Winnebago Industries, Inc. (NYSE:WGO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Rubius Therapeutics, Inc. (NASDAQ:RUBY) is even less popular than WGO. Hedge funds dodged a bullet by taking a bearish stance towards RUBY. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RUBY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RUBY investors were disappointed as the stock returned -50.1% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
