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Endocyte, Inc. (NASDAQ:ECYT), Kythera Biopharmaceuticals Inc (NASDAQ:KYTH): Should You Avoid Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL)?

Is Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) a safe stock to buy now? Prominent investors are in a bearish mood. The number of long hedge fund bets dropped by 2 lately.

To most stock holders, hedge funds are seen as unimportant, old financial vehicles of the past. While there are over 8000 funds trading at present, we at Insider Monkey hone in on the crème de la crème of this group, about 450 funds. Most estimates calculate that this group controls most of the smart money’s total asset base, and by keeping an eye on their top stock picks, we have unearthed a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Equally as key, optimistic insider trading sentiment is a second way to parse down the investments you’re interested in. There are a variety of motivations for an executive to get rid of shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this tactic if you know what to do (learn more here).

Now, we’re going to take a look at the latest action surrounding Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL).

How have hedgies been trading Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL)?

At the end of the fourth quarter, a total of 15 of the hedge funds we track were bullish in this stock, a change of -12% from the third quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially.

When looking at the hedgies we track, Deerfield Management, managed by James E. Flynn, holds the most valuable position in Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). Deerfield Management has a $30 million position in the stock, Chuck Roycecomprising 1.7% of its 13F portfolio. The second largest stake is held by Jacob Gottlieb of Visium Asset Management, with a $12 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining peers that are bullish include William Leland Edwards’s Palo Alto Investors, Kevin Kotler’s Broadfin Capital and Chuck Royce’s Royce & Associates.

Since Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedgies that elected to cut their entire stakes in Q4. Interestingly, SAC Subsidiary’s CR Intrinsic Investors cut the largest stake of all the hedgies we key on, totaling close to $0 million in stock.. Steven Cohen’s fund, SAC Capital Advisors, also said goodbye to its stock, about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds in Q4.

How are insiders trading Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL)?

Bullish insider trading is particularly usable when the primary stock in question has experienced transactions within the past 180 days. Over the latest half-year time frame, Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). These stocks are Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Kythera Biopharmaceuticals Inc (NASDAQ:KYTH), Endocyte, Inc. (NASDAQ:ECYT), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and Keryx Biopharmaceuticals (NASDAQ:KERX). All of these stocks are in the drug manufacturers – major industry and their market caps match RIGL’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Neurocrine Biosciences, Inc. (NASDAQ:NBIX) 12 0 1
Kythera Biopharmaceuticals Inc (NASDAQ:KYTH) 8 0 0
Endocyte, Inc. (NASDAQ:ECYT) 7 1 4
Intercept Pharmaceuticals Inc (NASDAQ:ICPT) 6 3 0
Keryx Biopharmaceuticals (NASDAQ:KERX) 6 0 2

With the returns shown by the aforementioned research, everyday investors should always watch hedge fund and insider trading activity, and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) shareholders fit into this picture quite nicely.

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