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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was in 32 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. RARE investors should be aware of an increase in activity from the world's largest hedge funds lately. There were 25 hedge funds in our database with RARE holdings at the end of March. Our calculations also showed that RARE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
According to most traders, hedge funds are perceived as slow, old investment tools of the past. While there are over 8000 funds with their doors open today, We look at the elite of this club, about 850 funds. These investment experts watch over bulk of all hedge funds' total asset base, and by monitoring their matchless picks, Insider Monkey has determined numerous investment strategies that have historically beaten the market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's check out the latest hedge fund action regarding Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Do Hedge Funds Think RARE Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in RARE a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the largest position in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). Alkeon Capital Management has a $182.5 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $177 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass D. E. Shaw's D E Shaw, Steve Cohen's Point72 Asset Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Motley Fool Asset Management allocated the biggest weight to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), around 1.08% of its 13F portfolio. Rock Springs Capital Management is also relatively very bullish on the stock, setting aside 0.88 percent of its 13F equity portfolio to RARE.
Now, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, created the most outsized position in Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). Millennium Management had $53.7 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $3.4 million position during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Greg Eisner's Engineers Gate Manager, and Jinghua Yan's TwinBeech Capital.
Let's check out hedge fund activity in other stocks similar to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). These stocks are WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Affiliated Managers Group, Inc. (NYSE:AMG), DCP Midstream LP (NYSE:DCP), Foot Locker, Inc. (NYSE:FL), 360 DigiTech, Inc. (NASDAQ:QFIN), Reynolds Consumer Products Inc. (NASDAQ:REYN), and MultiPlan Corporation (NYSE:MPLN). 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 WSC,52,1399877,5 AMG,30,784733,4 DCP,3,31363,-1 FL,31,416162,3 QFIN,14,82360,-5 REYN,14,108385,-5 MPLN,16,480813,-14 Average,22.9,471956,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $472 million. That figure was $770 million in RARE's case. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 3 bullish hedge fund positions. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RARE is 69.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately RARE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on RARE were disappointed as the stock returned -16.1% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.