Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Ra Pharmaceuticals, Inc. (NASDAQ:RARX) shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. RARX was in 18 hedge funds' portfolios at the end of the second quarter of 2019. There were 20 hedge funds in our database with RARX positions at the end of the previous quarter. Our calculations also showed that RARX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are seen as slow, old investment vehicles of the past. While there are over 8000 funds with their doors open at present, Our researchers hone in on the crème de la crème of this group, about 750 funds. These money managers administer the lion's share of the hedge fund industry's total capital, and by tailing their highest performing picks, Insider Monkey has formulated various investment strategies that have historically defeated the broader indices. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a peek at the latest hedge fund action surrounding Ra Pharmaceuticals, Inc. (NASDAQ:RARX).
What have hedge funds been doing with Ra Pharmaceuticals, Inc. (NASDAQ:RARX)?
Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the first quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in RARX a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ra Pharmaceuticals, Inc. (NASDAQ:RARX) was held by RA Capital Management, which reported holding $137 million worth of stock at the end of March. It was followed by Baker Bros. Advisors with a $54.2 million position. Other investors bullish on the company included Deerfield Management, Rock Springs Capital Management, and Sectoral Asset Management.
Because Ra Pharmaceuticals, Inc. (NASDAQ:RARX) has experienced falling interest from hedge fund managers, it's safe to say that there exists a select few hedgies who sold off their positions entirely in the second quarter. Interestingly, Ken Griffin's Citadel Investment Group cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling about $7.6 million in stock, and Renaissance Technologies was right behind this move, as the fund cut about $6.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the second quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Ra Pharmaceuticals, Inc. (NASDAQ:RARX) but similarly valued. We will take a look at Air Transport Services Group Inc. (NASDAQ:ATSG), Rush Enterprises, Inc. (NASDAQ:RUSHB), Gentherm Inc (NASDAQ:THRM), and Employers Holdings, Inc. (NYSE:EIG). This group of stocks' market values are closest to RARX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATSG,15,172396,-3 RUSHB,2,33341,-1 THRM,15,63158,-4 EIG,16,88500,-1 Average,12,89349,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $368 million in RARX's case. Employers Holdings, Inc. (NYSE:EIG) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Ra Pharmaceuticals, Inc. (NASDAQ:RARX) is more popular among hedge funds. 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 RARX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RARX were disappointed as the stock returned -21.4% 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 in Q3.
Disclosure: None. This article was originally published at Insider Monkey.