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Do Hedge Funds Love RedHill Biopharma Ltd (RDHL)?

Reymerlyn Martin
·6 min read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of RedHill Biopharma Ltd (NASDAQ:RDHL).

RedHill Biopharma Ltd (NASDAQ:RDHL) investors should be aware of an increase in activity from the world's largest hedge funds recently. RedHill Biopharma Ltd (NASDAQ:RDHL) was in 3 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 5. There were 2 hedge funds in our database with RDHL holdings at the end of June. Our calculations also showed that RDHL isn't among the 30 most popular stocks among hedge funds (click for Q3 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. 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 website. With all of this in mind we're going to view the recent hedge fund action regarding RedHill Biopharma Ltd (NASDAQ:RDHL).

What have hedge funds been doing with RedHill Biopharma Ltd (NASDAQ:RDHL)?

At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the second quarter of 2020. On the other hand, there were a total of 2 hedge funds with a bullish position in RDHL a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OZ Management has the number one position in RedHill Biopharma Ltd (NASDAQ:RDHL), worth close to $1.4 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $0.8 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions contain Ken Griffin's Citadel Investment Group, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors and . In terms of the portfolio weights assigned to each position OZ Management allocated the biggest weight to RedHill Biopharma Ltd (NASDAQ:RDHL), around 0.01% of its 13F portfolio. Citadel Investment Group is also relatively very bullish on the stock, setting aside 0.0002 percent of its 13F equity portfolio to RDHL.

Consequently, some big names have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in RedHill Biopharma Ltd (NASDAQ:RDHL). Citadel Investment Group had $0.2 million invested in the company at the end of the quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as RedHill Biopharma Ltd (NASDAQ:RDHL) but similarly valued. We will take a look at PolyMet Mining Corp. (NYSE:PLM), Kimbell Royalty Partners (NYSE:KRP), Bicycle Therapeutics plc (NASDAQ:BCYC), dMY Technology Group, Inc. (NYSE:DMYT), Century Bancorp, Inc. (NASDAQ:CNBKA), Teekay Tankers Ltd. (NYSE:TNK), and Par Pacific Holdings, Inc. (NYSE:PARR). This group of stocks' market caps resemble RDHL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLM,3,1600,-1 KRP,4,3816,1 BCYC,7,73961,1 DMYT,26,82516,4 CNBKA,4,14693,1 TNK,13,20186,-4 PARR,15,63142,1 Average,10.3,37131,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $2 million in RDHL's case. dMY Technology Group, Inc. (NYSE:DMYT) is the most popular stock in this table. On the other hand PolyMet Mining Corp. (NYSE:PLM) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks RedHill Biopharma Ltd (NASDAQ:RDHL) is even less popular than PLM. Our overall hedge fund sentiment score for RDHL is 24. 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. Hedge funds dodged a bullet by taking a bearish stance towards RDHL. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd but managed to beat the market again by 15.4 percentage points. Unfortunately RDHL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); RDHL investors were disappointed as the stock returned -14% since the end of the third quarter (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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

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