Is Relay Therapeutics, Inc. (RLAY) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of Relay Therapeutics, Inc. (NASDAQ:RLAY).

Is RLAY a good stock to buy? Relay Therapeutics, Inc. (NASDAQ:RLAY) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. RLAY shareholders have witnessed an increase in hedge fund interest of late. There were 17 hedge funds in our database with RLAY positions at the end of the fourth quarter. Our calculations also showed that RLAY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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Oleg Nodelman EcoR1 Capital

Oleg Nodelman of EcoR1 Capital

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 take a gander at the recent hedge fund action surrounding Relay Therapeutics, Inc. (NASDAQ:RLAY).

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

At first quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in RLAY over the last 23 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Oleg Nodelman’s EcoR1 Capital has the number one position in Relay Therapeutics, Inc. (NASDAQ:RLAY), worth close to $118.6 million, comprising 5.3% of its total 13F portfolio. The second most bullish fund manager is Eli Casdin of Casdin Capital, with a $116.7 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain Mark Lampert’s Biotechnology Value Fund / BVF Inc, Richard Driehaus’s Driehaus Capital and Joseph Edelman’s Perceptive Advisors. In terms of the portfolio weights assigned to each position Darwin Global Management allocated the biggest weight to Relay Therapeutics, Inc. (NASDAQ:RLAY), around 5.3% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, setting aside 5.26 percent of its 13F equity portfolio to RLAY.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Darwin Global Management, managed by Abhishek Trehan, established the biggest position in Relay Therapeutics, Inc. (NASDAQ:RLAY). Darwin Global Management had $27.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $6.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Frank Fu’s CaaS Capital, Bhagwan Jay Rao’s Integral Health Asset Management, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Relay Therapeutics, Inc. (NASDAQ:RLAY) but similarly valued. These stocks are Commscope Holding Company Inc (NASDAQ:COMM), Independent Bank Group Inc (NASDAQ:IBTX), Freedom Holding Corp. (NASDAQ:FRHC), Viant Technology Inc. (NASDAQ:DSP), Mr. Cooper Group Inc. (NASDAQ:COOP), VEON Ltd. (NASDAQ:VEON), and Michaels Companies Inc (NASDAQ:MIK). This group of stocks’ market caps match RLAY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COMM 32 757950 -3
IBTX 9 74670 -5
FRHC 12 55186 4
DSP 14 70607 14
COOP 24 638610 2
VEON 8 20221 2
MIK 33 573441 0
Average 18.9 312955 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $637 million in RLAY’s case. Michaels Companies Inc (NASDAQ:MIK) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 8 bullish hedge fund positions. Relay Therapeutics, Inc. (NASDAQ:RLAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RLAY is 62. 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 RLAY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RLAY were disappointed as the stock returned -3.6% 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.

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