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Is IRWD Stock A Buy or Sell?

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  • IRWD

In this article we will take a look at whether hedge funds think Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is IRWD stock a buy? Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) has seen an increase in support from the world's most elite money managers in recent months. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) was in 26 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 32. Our calculations also showed that IRWD isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Alex Denner Sarissa Capital
Alex Denner Sarissa Capital

Alex Denner of Sarissa Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 take a peek at the key hedge fund action encompassing Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD).

Do Hedge Funds Think IRWD Is A Good Stock To Buy Now?

At fourth quarter's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IRWD over the last 22 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is IRWD A Good Stock To Buy?
Is IRWD A Good Stock To Buy?

The largest stake in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) was held by Sarissa Capital Management, which reported holding $159.9 million worth of stock at the end of December. It was followed by Camber Capital Management with a $85.4 million position. Other investors bullish on the company included Bridger Management, D E Shaw, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Sarissa Capital Management allocated the biggest weight to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), around 16.32% of its 13F portfolio. HealthInvest Partners AB is also relatively very bullish on the stock, dishing out 6.3 percent of its 13F equity portfolio to IRWD.

Now, some big names have jumped into Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) headfirst. Park West Asset Management, managed by Peter S. Park, created the largest position in Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). Park West Asset Management had $10.9 million invested in the company at the end of the quarter. Anders Hallberg and Carl Bennet's HealthInvest Partners AB also made a $9.5 million investment in the stock during the quarter. The following funds were also among the new IRWD investors: Joseph Samuels's Islet Management, Steve Cohen's Point72 Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Let's also examine hedge fund activity in other stocks similar to Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD). We will take a look at Mersana Therapeutics, Inc. (NASDAQ:MRSN), First Midwest Bancorp Inc (NASDAQ:FMBI), EnLink Midstream LLC (NYSE:ENLC), PRA Group, Inc. (NASDAQ:PRAA), Enviva Partners, LP (NYSE:EVA), Piper Sandler Companies (NYSE:PIPR), and Vector Group Ltd (NYSE:VGR). This group of stocks' market values resemble IRWD's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRSN,30,618267,2 FMBI,16,82001,-1 ENLC,8,28595,-1 PRAA,13,40438,-6 EVA,9,252307,3 PIPR,12,50615,-2 VGR,14,143089,-3 Average,14.6,173616,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $424 million in IRWD's case. Mersana Therapeutics, Inc. (NASDAQ:MRSN) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 8 bullish hedge fund positions. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IRWD is 72.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately IRWD wasn't nearly as popular as these 30 stocks and hedge funds that were betting on IRWD were disappointed as the stock returned -6.8% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.

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