Is RAPT A Good Stock To Buy Now?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was RAPT Therapeutics, Inc. (NASDAQ:RAPT).

Is RAPT a good stock to buy now? Investors who are in the know were getting more optimistic. The number of bullish hedge fund positions rose by 9 recently. RAPT Therapeutics, Inc. (NASDAQ:RAPT) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RAPT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 7 hedge funds in our database with RAPT holdings at the end of June.

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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management

Israel Englander of Millennium Management

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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we’re going to take a look at the new hedge fund action encompassing RAPT Therapeutics, Inc. (NASDAQ:RAPT).

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

At third quarter’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 129% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in RAPT over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is RAPT A Good Stock To Buy?

More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of RAPT Therapeutics, Inc. (NASDAQ:RAPT), with a stake worth $18.5 million reported as of the end of September. Trailing Avoro Capital Advisors (venBio Select Advisor) was Acuta Capital Partners, which amassed a stake valued at $7.7 million. Millennium Management, Ghost Tree Capital, and Woodline Partners 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 Acuta Capital Partners allocated the biggest weight to RAPT Therapeutics, Inc. (NASDAQ:RAPT), around 2.1% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, dishing out 1.07 percent of its 13F equity portfolio to RAPT.

With a general bullishness amongst the heavyweights, specific money managers have jumped into RAPT Therapeutics, Inc. (NASDAQ:RAPT) headfirst. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, initiated the most outsized position in RAPT Therapeutics, Inc. (NASDAQ:RAPT). Avoro Capital Advisors (venBio Select Advisor) had $18.5 million invested in the company at the end of the quarter. Manfred Yu’s Acuta Capital Partners also initiated a $7.7 million position during the quarter. The other funds with new positions in the stock are Ken Greenberg and David Kim’s Ghost Tree Capital, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Efrem Kamen’s Pura Vida Investments.

Let’s also examine hedge fund activity in other stocks similar to RAPT Therapeutics, Inc. (NASDAQ:RAPT). We will take a look at Akouos, Inc. (NASDAQ:AKUS), Gogo Inc (NASDAQ:GOGO), World Acceptance Corp. (NASDAQ:WRLD), PAE Incorporated (NASDAQ:PAE), Douglas Dynamics Inc (NYSE:PLOW), Trean Insurance Group, Inc. (NASDAQ:TIG), and Keros Therapeutics, Inc. (NASDAQ:KROS). This group of stocks’ market caps are closest to RAPT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AKUS 12 178200 -8
GOGO 14 165265 -4
WRLD 12 137504 0
PAE 17 107936 0
PLOW 7 4584 0
TIG 14 49185 14
KROS 8 214776 -3
Average 12 122493 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $45 million in RAPT’s case. PAE Incorporated (NASDAQ:PAE) is the most popular stock in this table. On the other hand Douglas Dynamics Inc (NYSE:PLOW) is the least popular one with only 7 bullish hedge fund positions. RAPT Therapeutics, Inc. (NASDAQ:RAPT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RAPT is 85. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately RAPT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on RAPT were disappointed as the stock returned -24.6% since the end of September (through 12/14) 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 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.