Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first quarter, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first quarter still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Tricida, Inc. (NASDAQ:TCDA) changed recently.
In the 21st century investor’s toolkit there are dozens of signals stock market investors use to evaluate stocks. A pair of the most underrated signals are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can beat their index-focused peers by a superb amount (see the details here).
We’re going to take a look at the new hedge fund action regarding Tricida, Inc. (NASDAQ:TCDA).
What have hedge funds been doing with Tricida, Inc. (NASDAQ:TCDA)?
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TCDA over the last 15 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Tricida, Inc. (NASDAQ:TCDA) was held by OrbiMed Advisors, which reported holding $420.5 million worth of stock at the end of March. It was followed by Baker Bros. Advisors with a $69.6 million position. Other investors bullish on the company included venBio Select Advisor, Cormorant Asset Management, and Vivo Capital.
As industrywide interest jumped, key money managers were leading the bulls’ herd. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, assembled the most outsized position in Tricida, Inc. (NASDAQ:TCDA). Alkeon Capital Management had $6.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $2.5 million position during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Tricida, Inc. (NASDAQ:TCDA) but similarly valued. We will take a look at Kronos Worldwide, Inc. (NYSE:KRO), IAMGOLD Corporation (NYSE:IAG), Arco Platform Limited (NASDAQ:ARCE), and Badger Meter, Inc. (NYSE:BMI). This group of stocks’ market caps are closest to TCDA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $683 million in TCDA’s case. Badger Meter, Inc. (NYSE:BMI) is the most popular stock in this table. On the other hand Arco Platform Limited (NASDAQ:ARCE) is the least popular one with only 11 bullish hedge fund positions. Tricida, Inc. (NASDAQ:TCDA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately TCDA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TCDA were disappointed as the stock returned -2.7% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.