Is Ironwood Pharmaceuticals, Inc. (IRWD) A Good Stock To Buy?

Is Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is IRWD a good stock to buy? Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) shareholders have witnessed an increase in hedge fund sentiment of late. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 32. Our calculations also showed that IRWD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

David Harding

David Harding of Winton Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a look at the new hedge fund action encompassing Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).

Do Hedge Funds Think IRWD Is A Good Stock To Buy Now?

At first quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the fourth quarter of 2020. By comparison, 28 hedge funds held shares or bullish call options in IRWD a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Is IRWD A Good Stock To Buy?

Among these funds, Sarissa Capital Management held the most valuable stake in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), which was worth $183.2 million at the end of the fourth quarter. On the second spot was Camber Capital Management which amassed $83.9 million worth of shares. Renaissance Technologies, Bridger Management, and D E Shaw 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 Sarissa Capital Management allocated the biggest weight to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), around 17.56% of its 13F portfolio. HealthInvest Partners AB is also relatively very bullish on the stock, dishing out 12.91 percent of its 13F equity portfolio to IRWD.

As one would reasonably expect, some big names were breaking ground themselves. Healthcor Management LP, managed by Arthur B Cohen and Joseph Healey, assembled the biggest position in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). Healthcor Management LP had $8.2 million invested in the company at the end of the quarter. Joe Riccardo’s Healthcare Value Capital also made a $2.2 million investment in the stock during the quarter. The following funds were also among the new IRWD investors: Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), Paul Marshall and Ian Wace’s Marshall Wace LLP, and Roger Ibbotson’s Zebra Capital Management.

Let’s go over hedge fund activity in other stocks similar to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). These stocks are GCP Applied Technologies Inc. (NYSE:GCP), HudBay Minerals Inc (NYSE:HBM), Sangamo Therapeutics, Inc. (NASDAQ:SGMO), Cassava Sciences, Inc. (NASDAQ:SAVA), MacroGenics Inc (NASDAQ:MGNX), AppHarvest, Inc. (NASDAQ:APPH), and 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS). This group of stocks’ market caps match IRWD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GCP 13 407749 -4
HBM 15 389989 -4
SGMO 17 91681 -3
SAVA 5 35601 -2
MGNX 30 596606 7
APPH 21 380762 21
FLWS 22 62575 -5
Average 17.6 280709 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $281 million. That figure was $450 million in IRWD’s case. MacroGenics Inc (NASDAQ:MGNX) is the most popular stock in this table. On the other hand Cassava Sciences, Inc. (NASDAQ:SAVA) is the least popular one with only 5 bullish hedge fund positions. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IRWD is 79.3. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on IRWD, though not to the same extent, as the stock returned 12.8% since Q1 (through July 9th) and outperformed the market as well.

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