In this article we will take a look at whether hedge funds think Radius Health Inc (NASDAQ:RDUS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Radius Health Inc (NASDAQ:RDUS) an excellent investment right now? Prominent investors were taking an optimistic view. The number of bullish hedge fund bets inched up by 2 lately. Radius Health Inc (NASDAQ:RDUS) was in 21 hedge funds’ portfolios at the end of March. The all time high for this statistic is 24. Our calculations also showed that RDUS 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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Henrik Rhenman of Rhenman & Partners Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. 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 check out the key hedge fund action encompassing Radius Health Inc (NASDAQ:RDUS).
Do Hedge Funds Think RDUS Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards RDUS over the last 23 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Farallon Capital was the largest shareholder of Radius Health Inc (NASDAQ:RDUS), with a stake worth $44 million reported as of the end of March. Trailing Farallon Capital was Camber Capital Management, which amassed a stake valued at $31.3 million. Rubric Capital Management, Two Sigma Advisors, and Rhenman & Partners Asset Management 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 Camber Capital Management allocated the biggest weight to Radius Health Inc (NASDAQ:RDUS), around 1.07% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, setting aside 0.98 percent of its 13F equity portfolio to RDUS.
Now, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the biggest position in Radius Health Inc (NASDAQ:RDUS). Millennium Management had $2 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $0.6 million position during the quarter. The other funds with brand new RDUS positions are Parvinder Thiara’s Athanor Capital and Greg Eisner’s Engineers Gate Manager.
Let’s also examine hedge fund activity in other stocks similar to Radius Health Inc (NASDAQ:RDUS). These stocks are Ikena Oncology, Inc. (NASDAQ:IKNA), Wabash National Corporation (NYSE:WNC), Mesoblast Limited (NASDAQ:MESO), Houghton Mifflin Harcourt Co (NASDAQ:HMHC), MannKind Corporation (NASDAQ:MNKD), Geopark Ltd (NYSE:GPRK), and Meridian Bancorp, Inc. (NASDAQ:EBSB). This group of stocks’ market valuations are similar to RDUS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IKNA | 13 | 295677 | 13 |
| WNC | 14 | 87683 | 0 |
| MESO | 2 | 568 | 1 |
| HMHC | 25 | 139127 | 0 |
| MNKD | 12 | 87910 | 1 |
| GPRK | 8 | 99185 | -3 |
| EBSB | 15 | 95202 | 1 |
| Average | 12.7 | 115050 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.7 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $142 million in RDUS’s case. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) is the most popular stock in this table. On the other hand Mesoblast Limited (NASDAQ:MESO) is the least popular one with only 2 bullish hedge fund positions. Radius Health Inc (NASDAQ:RDUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RDUS is 74.6. 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. 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 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately RDUS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RDUS were disappointed as the stock returned -21.3% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Radius Health Inc. (NASDAQ:RDUS)
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Disclosure: None. This article was originally published at Insider Monkey.
