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Hedge Funds Have Never Been Less Bullish On Rigel Pharmaceuticals, Inc. (RIGL)

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Abigail Fisher
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At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) makes for a good investment right now.

Is Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) a sound investment right now? The smart money is getting less optimistic. The number of bullish hedge fund bets went down by 1 in recent months. Our calculations also showed that RIGL isn't among the 30 most popular stocks among hedge funds (see the video below). RIGL was in 14 hedge funds' portfolios at the end of June. There were 15 hedge funds in our database with RIGL holdings at the end of the previous quarter.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

RIGL_oct2019
RIGL_oct2019

Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let's take a look at the fresh hedge fund action encompassing Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL).

How are hedge funds trading Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL)?

At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in RIGL a year ago. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Justin John Ferayorni - Tamarack Capital Management
Justin John Ferayorni - Tamarack Capital Management

According to Insider Monkey's hedge fund database, Israel Englander's Millennium Management has the most valuable position in Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), worth close to $17.6 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Tamarack Capital Management, managed by Justin John Ferayorni, which holds a $14 million position; 4.3% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism consist of Ken Griffin's Citadel Investment Group, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management and William Leland Edwards's Palo Alto Investors.

Because Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers that slashed their positions entirely in the second quarter. It's worth mentioning that Michael Castor's Sio Capital dropped the biggest position of all the hedgies tracked by Insider Monkey, totaling about $4.1 million in stock. Andrew Feldstein and Stephen Siderow's fund, Blue Mountain Capital, also said goodbye to its stock, about $0.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds in the second quarter.

Let's check out hedge fund activity in other stocks similar to Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). These stocks are Capital City Bank Group, Inc. (NASDAQ:CCBG), SpartanNash Company (NASDAQ:SPTN), Silvercorp Metals Inc. (NYSE:SVM), and Franklin Financial Network Inc (NYSE:FSB). This group of stocks' market values are similar to RIGL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCBG,3,6505,-1 SPTN,20,27535,4 SVM,9,18803,0 FSB,4,11794,0 Average,9,16159,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $77 million in RIGL's case. SpartanNash Company (NASDAQ:SPTN) is the most popular stock in this table. On the other hand Capital City Bank Group, Inc. (NASDAQ:CCBG) is the least popular one with only 3 bullish hedge fund positions. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately RIGL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RIGL were disappointed as the stock returned -28.4% during the third 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 20 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.

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