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Hedge Funds Done Buying Tricida, Inc. (TCDA)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Tricida, Inc. (NASDAQ:TCDA).

Hedge fund interest in Tricida, Inc. (NASDAQ:TCDA) 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 TCDA to other stocks including Kaiser Aluminum Corp. (NASDAQ:KALU), Rush Enterprises, Inc. (NASDAQ:RUSHB), and National HealthCare Corporation (NYSE:NHC) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the key hedge fund action regarding Tricida, Inc. (NASDAQ:TCDA).

Hedge fund activity in Tricida, Inc. (NASDAQ:TCDA)

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in TCDA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, OrbiMed Advisors held the most valuable stake in Tricida, Inc. (NASDAQ:TCDA), which was worth $211.5 million at the end of the third quarter. On the second spot was Baker Bros. Advisors which amassed $58.7 million worth of shares. Redmile Group, Avoro Capital Advisors (venBio Select Advisor), and Farallon Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position OrbiMed Advisors allocated the biggest weight to Tricida, Inc. (NASDAQ:TCDA), around 3.55% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, earmarking 2.74 percent of its 13F equity portfolio to TCDA.

Judging by the fact that Tricida, Inc. (NASDAQ:TCDA) has witnessed bearish sentiment from the smart money, logic holds that there was a specific group of hedge funds that decided to sell off their entire stakes last quarter. Interestingly, Jonathan Barrett and Paul Segal’s Luminus Management said goodbye to the largest position of the 750 funds followed by Insider Monkey, worth close to $5.3 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $1.2 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Tricida, Inc. (NASDAQ:TCDA). We will take a look at Kaiser Aluminum Corp. (NASDAQ:KALU), Rush Enterprises, Inc. (NASDAQ:RUSHB), National HealthCare Corporation (NYSE:NHC), and Kontoor Brands, Inc. (NYSE:KTB). This group of stocks’ market valuations match TCDA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KALU 16 75036 -1
RUSHB 3 27046 -1
NHC 11 55616 0
KTB 16 33264 2
Average 11.5 47741 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $462 million in TCDA’s case. Kaiser Aluminum Corp. (NASDAQ:KALU) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Tricida, Inc. (NASDAQ:TCDA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. Unfortunately TCDA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TCDA were disappointed as the stock returned 19.5% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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