Do Hedge Funds Love Renalytix AI plc (RNLX)?

In this article you are going to find out whether hedge funds think Renalytix AI plc (NASDAQ:RNLX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Renalytix AI plc (NASDAQ:RNLX) undervalued? Prominent investors were buying. The number of long hedge fund bets improved by 4 lately. Renalytix AI plc (NASDAQ:RNLX) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that RNLX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to take a glance at the recent hedge fund action encompassing Renalytix AI plc (NASDAQ:RNLX).

How have hedgies been trading Renalytix AI plc (NASDAQ:RNLX)?

At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4 from the second quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in RNLX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Zachary Miller’s Parian Global Management has the most valuable position in Renalytix AI plc (NASDAQ:RNLX), worth close to $10.4 million, comprising 3.3% of its total 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $3.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain Matthew Halbower’s Pentwater Capital Management, Mark Broach’s Manatuck Hill Partners and . In terms of the portfolio weights assigned to each position Parian Global Management allocated the biggest weight to Renalytix AI plc (NASDAQ:RNLX), around 3.31% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, setting aside 0.24 percent of its 13F equity portfolio to RNLX.

As aggregate interest increased, key money managers were leading the bulls’ herd. Parian Global Management, managed by Zachary Miller, assembled the largest position in Renalytix AI plc (NASDAQ:RNLX). Parian Global Management had $10.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $3.6 million position during the quarter. The following funds were also among the new RNLX investors: Matthew Halbower’s Pentwater Capital Management and Mark Broach’s Manatuck Hill Partners.

Let’s go over hedge fund activity in other stocks similar to Renalytix AI plc (NASDAQ:RNLX). We will take a look at Trevena Inc (NASDAQ:TRVN), Collectors Universe, Inc. (NASDAQ:CLCT), AngioDynamics, Inc. (NASDAQ:ANGO), Energy Recovery, Inc. (NASDAQ:ERII), Watford Holdings Ltd. (NASDAQ:WTRE), American Software, Inc. (NASDAQ:AMSWA), and Inventiva S.A. (NASDAQ:IVA). This group of stocks’ market caps are similar to RNLX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRVN 5 2318 -1
CLCT 11 65834 2
ANGO 14 37453 4
ERII 11 54125 -1
WTRE 11 16288 5
AMSWA 11 40697 -1
IVA 8 26719 8
Average 10.1 34776 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $17 million in RNLX’s case. AngioDynamics, Inc. (NASDAQ:ANGO) is the most popular stock in this table. On the other hand Trevena Inc (NASDAQ:TRVN) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Renalytix AI plc (NASDAQ:RNLX) is even less popular than TRVN. Our overall hedge fund sentiment score for RNLX is 9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on RNLX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on RNLX as the stock returned 15.2% since Q3 (through November 27th) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.