Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) from the perspective of those elite funds.
Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was in 14 hedge funds' portfolios at the end of the fourth quarter of 2018. RARE investors should be aware of a decrease in activity from the world's largest hedge funds in recent months. There were 17 hedge funds in our database with RARE holdings at the end of the previous quarter. Our calculations also showed that RARE isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a gander at the fresh hedge fund action encompassing Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Hedge fund activity in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE)
At Q4's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards RARE over the last 14 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Alkeon Capital Management held the most valuable stake in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), which was worth $35.6 million at the end of the fourth quarter. On the second spot was Highline Capital Management which amassed $19.9 million worth of shares. Moreover, Rock Springs Capital Management, D E Shaw, and Point72 Asset Management were also bullish on Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), allocating a large percentage of their portfolios to this stock.
Seeing as Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedgies who were dropping their full holdings in the third quarter. Intriguingly, Oleg Nodelman's EcoR1 Capital dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth an estimated $24.8 million in stock. James A. Silverman's fund, Opaleye Management, also cut its stock, about $6.1 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) but similarly valued. These stocks are Shenandoah Telecommunications Company (NASDAQ:SHEN), South State Corporation (NASDAQ:SSB), Ellie Mae Inc (NYSE:ELLI), and Greif, Inc. (NYSE:GEF). All of these stocks' market caps are similar to RARE's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SHEN,11,95482,-3 SSB,14,71136,-1 ELLI,18,504870,3 GEF,20,108586,1 Average,15.75,195019,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $106 million in RARE's case. Greif, Inc. (NYSE:GEF) is the most popular stock in this table. On the other hand Shenandoah Telecommunications Company (NASDAQ:SHEN) is the least popular one with only 11 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 calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on RARE as the stock returned 50.3% and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.