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. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM).
Is RYTM a good stock to buy now? The best stock pickers were in a pessimistic mood. The number of long hedge fund bets decreased by 1 in recent months. Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) was in 10 hedge funds’ portfolios at the end of September. The all time high for this statistics is 15. Our calculations also showed that RYTM 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 11 hedge funds in our database with RYTM positions at the end of the second quarter.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
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. With all of this in mind we’re going to take a gander at the fresh hedge fund action regarding Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM).
Do Hedge Funds Think RYTM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in RYTM over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, RA Capital Management held the most valuable stake in Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), which was worth $111.4 million at the end of the third quarter. On the second spot was Baker Bros. Advisors which amassed $53.6 million worth of shares. Deerfield Management, Rock Springs Capital Management, and Samsara BioCapital 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 RA Capital Management allocated the biggest weight to Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), around 2.04% of its 13F portfolio. Samsara BioCapital is also relatively very bullish on the stock, setting aside 1.42 percent of its 13F equity portfolio to RYTM.
Due to the fact that Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) has faced bearish sentiment from the smart money, it’s safe to say that there is a sect of funds that slashed their entire stakes by the end of the third quarter. Intriguingly, Nathaniel August’s Mangrove Partners sold off the largest investment of the 750 funds monitored by Insider Monkey, comprising close to $1.3 million in stock. Andre F. Perold’s fund, HighVista Strategies, also cut its stock, about $0.4 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) but similarly valued. We will take a look at At Home Group Inc. (NYSE:HOME), Schweitzer-Mauduit International, Inc. (NYSE:SWM), Construction Partners, Inc. (NASDAQ:ROAD), Vocera Communications Inc (NYSE:VCRA), PetIQ, Inc. (NASDAQ:PETQ), Retrophin Inc (NASDAQ:RTRX), and Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT). This group of stocks’ market values match RYTM’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.7 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $227 million in RYTM’s case. At Home Group Inc. (NYSE:HOME) is the most popular stock in this table. On the other hand Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) is the least popular one with only 6 bullish hedge fund positions. Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RYTM is 31.1. 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 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on RYTM as the stock returned 34.9% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.