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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) based on that data and determine whether they were really smart about the stock.
Is Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) a good stock to buy now? Investors who are in the know were becoming more confident. The number of long hedge fund positions improved by 4 in recent months. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) was in 32 hedge funds' portfolios at the end of June. The all time high for this statistics is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IRWD isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 28 hedge funds in our database with IRWD positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
To most investors, hedge funds are viewed as slow, old financial tools of the past. While there are over 8000 funds with their doors open today, We hone in on the elite of this group, approximately 850 funds. These investment experts orchestrate most of the smart money's total capital, and by following their matchless picks, Insider Monkey has brought to light several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
David E. Shaw of D.E. Shaw
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind we're going to review the fresh hedge fund action encompassing Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).
Hedge fund activity in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD)
At Q2's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IRWD over the last 20 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) was held by Sarissa Capital Management, which reported holding $144.9 million worth of stock at the end of September. It was followed by Camber Capital Management with a $67.1 million position. Other investors bullish on the company included Slate Path Capital, Bridger Management, and D E Shaw. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), around 16.12% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, earmarking 3.84 percent of its 13F equity portfolio to IRWD.
Consequently, specific money managers have been driving this bullishness. Camber Capital Management, managed by Stephen DuBois, initiated the most valuable position in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). Camber Capital Management had $67.1 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker's Woodline Partners also initiated a $15.6 million position during the quarter. The following funds were also among the new IRWD investors: Joseph Samuels's Islet Management, Greg Eisner's Engineers Gate Manager, and Parvinder Thiara's Athanor Capital.
Let's now review hedge fund activity in other stocks similar to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). These stocks are Viper Energy Partners LP (NASDAQ:VNOM), Plains GP Holdings LP (NYSE:PAGP), Ameris Bancorp (NASDAQ:ABCB), Innovative Industrial Properties, Inc. (NYSE:IIPR), Hub Group Inc (NASDAQ:HUBG), SkyWest, Inc. (NASDAQ:SKYW), and TransAlta Corporation (NYSE:TAC). This group of stocks' market valuations are closest to IRWD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VNOM,10,40175,-1 PAGP,19,109862,-3 ABCB,17,82148,4 IIPR,20,185487,6 HUBG,21,199671,4 SKYW,16,83235,-2 TAC,12,51703,-3 Average,16.4,107469,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $369 million in IRWD's case. Hub Group Inc (NASDAQ:HUBG) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is more popular among hedge funds. Our overall hedge fund sentiment score for IRWD is 89. 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 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Unfortunately IRWD wasn't nearly as popular as these 10 stocks and hedge funds that were betting on IRWD were disappointed as the stock returned -3.6% since the end of the second quarter 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.