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Is Radius Health Inc (RDUS) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Radius Health Inc (NASDAQ:RDUS) based on that data and determine whether they were really smart about the stock.

Radius Health Inc (NASDAQ:RDUS) investors should be aware of a decrease in support from the world’s most elite money managers recently. Radius Health Inc (NASDAQ:RDUS) was in 21 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. There were 23 hedge funds in our database with RDUS positions at the end of the first quarter. Our calculations also showed that RDUS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We are also checking out this lithium company which could benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a look at the latest hedge fund action encompassing Radius Health Inc (NASDAQ:RDUS).

Hedge fund activity in Radius Health Inc (NASDAQ:RDUS)

Heading into the third quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RDUS over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is RDUS A Good Stock To Buy?

More specifically, Farallon Capital was the largest shareholder of Radius Health Inc (NASDAQ:RDUS), with a stake worth $28.6 million reported as of the end of September. Trailing Farallon Capital was Rubric Capital Management, which amassed a stake valued at $16.7 million. Rock Springs Capital Management, Renaissance Technologies, and Two Sigma Advisors 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 Rubric Capital Management allocated the biggest weight to Radius Health Inc (NASDAQ:RDUS), around 1.93% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, earmarking 1.44 percent of its 13F equity portfolio to RDUS.

Since Radius Health Inc (NASDAQ:RDUS) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there exists a select few funds who were dropping their full holdings by the end of the second quarter. Interestingly, James A. Silverman’s Opaleye Management dropped the biggest position of the “upper crust” of funds followed by Insider Monkey, worth close to $2.2 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $1.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.

Let’s go over hedge fund activity in other stocks similar to Radius Health Inc (NASDAQ:RDUS). These stocks are The Pennant Group, Inc. (NASDAQ:PNTG), Molecular Templates, Inc. (NASDAQ:MTEM), Oaktree Specialty Lending Corporation (NASDAQ:OCSL), Protagonist Therapeutics, Inc. (NASDAQ:PTGX), Enerplus Corp (NYSE:ERF), Meta Financial Group Inc. (NASDAQ:CASH), and AVROBIO, Inc. (NASDAQ:AVRO). 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
PNTG 10 20651 2
MTEM 23 145458 6
OCSL 12 47880 -1
PTGX 11 216579 -4
ERF 16 95925 1
CASH 16 44017 3
AVRO 17 164664 0
Average 15 105025 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $105 million. That figure was $119 million in RDUS’s case. Molecular Templates, Inc. (NASDAQ:MTEM) is the most popular stock in this table. On the other hand The Pennant Group, Inc. (NASDAQ:PNTG) is the least popular one with only 10 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 71.6. 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 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately RDUS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RDUS were disappointed as the stock returned -16.8% in Q3 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 many of these stocks already outperformed the market so far this year.

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