With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Ultragenyx Pharmaceutical Inc (NASDAQ:RARE).
Is RARE a good stock to buy now? Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) has seen a decrease in activity from the world's largest hedge funds lately. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) was in 20 hedge funds' portfolios at the end of September. The all time high for this statistic is 25. Our calculations also showed that RARE 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.
In the eyes of most market participants, hedge funds are perceived as unimportant, old financial tools of years past. While there are more than 8000 funds with their doors open today, We look at the elite of this group, approximately 850 funds. These hedge fund managers command most of the hedge fund industry's total asset base, and by observing their top investments, Insider Monkey has uncovered numerous investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Kris Jenner of Rock Springs Capital Management
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Do Hedge Funds Think RARE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in RARE a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Alkeon Capital Management was the largest shareholder of Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), with a stake worth $154.5 million reported as of the end of September. Trailing Alkeon Capital Management was Rock Springs Capital Management, which amassed a stake valued at $47.4 million. Citadel Investment Group, D E Shaw, and Atika Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rock Springs Capital Management allocated the biggest weight to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), around 1.2% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, dishing out 0.53 percent of its 13F equity portfolio to RARE.
Due to the fact that Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there is a sect of hedge funds who sold off their positions entirely by the end of the third quarter. At the top of the heap, Oleg Nodelman's EcoR1 Capital sold off the largest investment of the 750 funds watched by Insider Monkey, valued at an estimated $40.6 million in stock. Jerome Pfund and Michael Sjostrom's fund, Sectoral Asset Management, also dumped its stock, about $0.7 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). These stocks are Redfin Corporation (NASDAQ:RDFN), Ralph Lauren Corporation (NYSE:RL), Jones Lang LaSalle Inc (NYSE:JLL), Life Storage, Inc. (NYSE:LSI), Lancaster Colony Corporation (NASDAQ:LANC), US Foods Holding Corp. (NYSE:USFD), and Helen of Troy Limited (NASDAQ:HELE). 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 RDFN,28,188897,2 RL,29,473245,4 JLL,25,666645,2 LSI,18,151076,-1 LANC,24,308621,5 USFD,41,769983,6 HELE,27,210119,14 Average,27.4,395512,4.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $396 million. That figure was $311 million in RARE's case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand Life Storage, Inc. (NYSE:LSI) is the least popular one with only 18 bullish hedge fund positions. Ultragenyx Pharmaceutical Inc (NASDAQ:RARE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RARE is 29.3. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on RARE as the stock returned 86.4% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.