In this article you are going to find out whether hedge funds think Retrophin Inc (NASDAQ:RTRX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Retrophin Inc (NASDAQ:RTRX) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of March. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Aerie Pharmaceuticals Inc (NASDAQ:AERI), AAR Corp. (NYSE:AIR), and Bloomin’ Brands Inc (NASDAQ:BLMN) to gather more data points. Our calculations also showed that RTRX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the fresh hedge fund action encompassing Retrophin Inc (NASDAQ:RTRX).
What have hedge funds been doing with Retrophin Inc (NASDAQ:RTRX)?
At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RTRX over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, RA Capital Management held the most valuable stake in Retrophin Inc (NASDAQ:RTRX), which was worth $60.8 million at the end of the third quarter. On the second spot was Perceptive Advisors which amassed $42.2 million worth of shares. Consonance Capital Management, Scopia Capital, and D E Shaw 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 Consonance Capital Management allocated the biggest weight to Retrophin Inc (NASDAQ:RTRX), around 2.51% of its 13F portfolio. Scopia Capital is also relatively very bullish on the stock, setting aside 2.32 percent of its 13F equity portfolio to RTRX.
Judging by the fact that Retrophin Inc (NASDAQ:RTRX) has experienced declining sentiment from the smart money, it’s easy to see that there lies a certain “tier” of hedge funds that elected to cut their full holdings in the first quarter. It’s worth mentioning that Michael Rockefeller and KarláKroeker’s Woodline Partners dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $4 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dumped about $2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Retrophin Inc (NASDAQ:RTRX). These stocks are Aerie Pharmaceuticals Inc (NASDAQ:AERI), AAR Corp. (NYSE:AIR), Bloomin’ Brands Inc (NASDAQ:BLMN), and Qutoutiao Inc. (NASDAQ:QTT). This group of stocks’ market valuations resemble RTRX’s market valuation.
|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 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $74 million. That figure was $258 million in RTRX’s case. Aerie Pharmaceuticals Inc (NASDAQ:AERI) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 9 bullish hedge fund positions. Retrophin Inc (NASDAQ:RTRX) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but beat the market by 14.2 percentage points. Unfortunately RTRX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on RTRX were disappointed as the stock returned 3.9% during the same time period 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.
Disclosure: None. This article was originally published at Insider Monkey.