Ultragenyx Pharmaceutical Inc (RARE): Hedge Funds In Wait-and-See Mode

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).

Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of March. At the end of this article we will also compare RARE to other stocks including Regal Beloit Corporation (NYSE:RBC), Freshpet Inc (NASDAQ:FRPT), and Taubman Centers, Inc. (NYSE:TCO) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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. 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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 go over the recent hedge fund action surrounding Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).

Hedge fund activity in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE)

Heading into the second quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RARE over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is RARE A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), with a stake worth $72.3 million reported as of the end of September. Trailing Citadel Investment Group was Alkeon Capital Management, which amassed a stake valued at $72 million. Rock Springs Capital Management, D E Shaw, and EcoR1 Capital 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 EcoR1 Capital allocated the biggest weight to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), around 1.72% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, dishing out 1.37 percent of its 13F equity portfolio to RARE.

Judging by the fact that Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds who sold off their entire stakes heading into Q4. At the top of the heap, Steve Cohen’s Point72 Asset Management cut the largest investment of the 750 funds tracked by Insider Monkey, totaling close to $5 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). We will take a look at Regal Beloit Corporation (NYSE:RBC), Freshpet Inc (NASDAQ:FRPT), Taubman Centers, Inc. (NYSE:TCO), and Gildan Activewear Inc (NYSE:GIL). This group of stocks’ market caps match RARE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RBC 19 204663 -5
FRPT 24 141032 4
TCO 38 478517 12
GIL 22 274827 0
Average 25.75 274760 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $275 million. That figure was $236 million in RARE’s case. Taubman Centers, Inc. (NYSE:TCO) is the most popular stock in this table. On the other hand Regal Beloit Corporation (NYSE:RBC) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is even less popular than RBC. Hedge funds clearly dropped the ball on RARE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on RARE as the stock returned 72.8% so far in the second quarter and outperformed the market by an even larger margin.

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