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Retrophin Inc (RTRX): Are Hedge Funds Right About This Stock?

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) a buy here? Hedge funds are becoming less hopeful. The number of bullish hedge fund bets fell by 3 in recent months. 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 Accelerate Diagnostics Inc (NASDAQ:AXDX), National Bank Holdings Corp (NYSE:NBHC), and Kronos Worldwide, Inc. (NYSE:KRO) to gather more data points.

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In the financial world there are tons of tools market participants employ to appraise their stock investments. Some of the most underrated 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 beat the S&P 500 by a healthy amount (see the details here).

Keeping this in mind, we’re going to view the fresh action encompassing Retrophin Inc (NASDAQ:RTRX).

What does the smart money think about 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 -12% from the second quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Consonance Capital Management, managed by Mitchell Blutt, holds the number one position in Retrophin Inc (NASDAQ:RTRX). Consonance Capital Management has an $69.9 million position in the stock, comprising 9.8% of its 13F portfolio. On Consonance Capital Management’s heels is Perceptive Advisors, managed by Joseph Edelman, which holds an $53.6 million position; 4.3% of its 13F portfolio is allocated to the company. Some other peers with similar optimism consist of Kevin Kotler’s Broadfin Capital, Paul Orlin and Alex Porter’s Amici Capital and Oleg Nodelman’s EcoR1 Capital.

Judging by the fact that Retrophin Inc (NASDAQ:RTRX) has experienced falling interest from hedge fund managers, we can see that there is a sect of hedge funds who were dropping their full holdings by the end of the third quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management dumped the largest position of all the hedgies monitored by Insider Monkey, worth close to $7.6 million in stock. Louis Bacon’s fund, Moore Global Investments, also sold off its stock, about $2.8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Retrophin Inc (NASDAQ:RTRX). These stocks are Accelerate Diagnostics Inc (NASDAQ:AXDX), National Bank Holdings Corp (NYSE:NBHC), Kronos Worldwide, Inc. (NYSE:KRO), and Employers Holdings, Inc. (NYSE:EIG). This group of stocks’ market caps match RTRX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AXDX 11 57321 -3
NBHC 12 134438 1
KRO 6 1809 -1
EIG 16 57566 2

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $63 million. That figure was $291 million in RTRX’s case. Employers Holdings, Inc. (NYSE:EIG) is the most popular stock in this table. On the other hand Kronos Worldwide, Inc. (NYSE:KRO) is the least popular one with only 6 bullish hedge fund positions. On comparison Retrophin Inc (NASDAQ: RTRX) is even more popular than EIG. This may indicate it is a good stock to buy, so it might be a good idea to research more and potentially include it in your portfolio.

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