Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) to find out whether there were any major changes in hedge funds’ views.
Is RARE a good stock to buy? Money managers were getting less bullish. The number of long hedge fund positions were trimmed by 1 recently. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was in 25 hedge funds’ portfolios at the end of March. The all time high for this statistic is 26. Our calculations also showed that RARE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 26 hedge funds in our database with RARE holdings at the end of December.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Felix Baker of Baker Bros.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. Now we’re going to take a gander at the recent hedge fund action encompassing Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Do Hedge Funds Think RARE Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards RARE over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was held by Alkeon Capital Management, which reported holding $149.6 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $107.5 million position. Other investors bullish on the company included D E Shaw, Rock Springs Capital Management, and Baker Bros. Advisors. In terms of the portfolio weights assigned to each position Motley Fool Asset Management allocated the biggest weight to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), around 1.25% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, earmarking 1.12 percent of its 13F equity portfolio to RARE.
Judging by the fact that Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that elected to cut their entire stakes by the end of the first quarter. At the top of the heap, Principal Global Investors’s Columbus Circle Investors dropped the largest investment of the 750 funds tracked by Insider Monkey, valued at close to $8.3 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $3.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks similar to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). We will take a look at People’s United Financial, Inc. (NASDAQ:PBCT), Woodward Inc (NASDAQ:WWD), Smartsheet Inc. (NYSE:SMAR), SiteOne Landscape Supply, Inc. (NYSE:SITE), CubeSmart (NYSE:CUBE), Jefferies Financial Group Inc. (NYSE:JEF), and PVH Corp (NYSE:PVH). This group of stocks’ market valuations match RARE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PBCT | 20 | 208579 | -9 |
| WWD | 27 | 643051 | 8 |
| SMAR | 39 | 1490070 | -6 |
| SITE | 16 | 67390 | -1 |
| CUBE | 25 | 350765 | 1 |
| JEF | 38 | 700629 | 5 |
| PVH | 34 | 1234659 | -3 |
| Average | 28.4 | 670735 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $671 million. That figure was $588 million in RARE’s case. Smartsheet Inc. (NYSE:SMAR) is the most popular stock in this table. On the other hand SiteOne Landscape Supply, Inc. (NYSE:SITE) is the least popular one with only 16 bullish hedge fund positions. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RARE is 52.4. 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 negative signal and 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 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately RARE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RARE investors were disappointed as the stock returned -19.8% since the end of March (through 7/9) 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 most of these stocks already outperformed the market in 2021.
Follow Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)
Follow Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE)
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Disclosure: None. This article was originally published at Insider Monkey.
