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Is RDHL Stock A Buy Here?

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·6 min read
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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about RedHill Biopharma Ltd (NASDAQ:RDHL) in this article.

Is RDHL stock a buy? RedHill Biopharma Ltd (NASDAQ:RDHL) has experienced an increase in support from the world's most elite money managers lately. RedHill Biopharma Ltd (NASDAQ:RDHL) was in 4 hedge funds' portfolios at the end of March. The all time high for this statistic is 5. There were 3 hedge funds in our database with RDHL holdings at the end of December. Our calculations also showed that RDHL isn't among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Nathan Fischel DAFNA Capital
Nathan Fischel DAFNA Capital

Nathan Fischel of DAFNA Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. Keeping this in mind let's check out the latest hedge fund action surrounding RedHill Biopharma Ltd (NASDAQ:RDHL).

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

At Q1's end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in RDHL a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, ARK Investment Management, managed by Catherine D. Wood, holds the largest position in RedHill Biopharma Ltd (NASDAQ:RDHL). ARK Investment Management has a $5.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On ARK Investment Management's heels is Great Point Partners, managed by Jeffrey Jay and David Kroin, which holds a $5.2 million position; 1.1% of its 13F portfolio is allocated to the stock. Other peers that are bullish include Hal Mintz's Sabby Capital, Nathan Fischel's DAFNA Capital Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Great Point Partners allocated the biggest weight to RedHill Biopharma Ltd (NASDAQ:RDHL), around 1.07% of its 13F portfolio. Sabby Capital is also relatively very bullish on the stock, earmarking 0.9 percent of its 13F equity portfolio to RDHL.

Now, key hedge funds have jumped into RedHill Biopharma Ltd (NASDAQ:RDHL) headfirst. Great Point Partners, managed by Jeffrey Jay and David Kroin, initiated the most valuable position in RedHill Biopharma Ltd (NASDAQ:RDHL). Great Point Partners had $5.2 million invested in the company at the end of the quarter. Hal Mintz's Sabby Capital also initiated a $4.6 million position during the quarter. The only other fund with a new position in the stock is Nathan Fischel's DAFNA Capital Management.

Let's now review hedge fund activity in other stocks similar to RedHill Biopharma Ltd (NASDAQ:RDHL). We will take a look at Ondas Holdings Inc. (NASDAQ:ONDS), AGM Group Holdings Inc. (NASDAQ:AGMH), PARTS iD, Inc. (NYSE:ID), Gran Tierra Energy Inc. (NYSE:GTE), Iteris Inc (NASDAQ:ITI), Oil-Dri Corporation of America (NYSE:ODC), and Ucommune International Ltd (NASDAQ:UK). All of these stocks' market caps are closest to RDHL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ONDS,5,2690,2 AGMH,1,144,0 ID,6,8061,2 GTE,6,36649,-2 ITI,16,42326,4 ODC,4,29522,0 UK,4,705,1 Average,6,17157,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $19 million in RDHL's case. Iteris Inc (NASDAQ:ITI) is the most popular stock in this table. On the other hand AGM Group Holdings Inc. (NASDAQ:AGMH) is the least popular one with only 1 bullish hedge fund positions. RedHill Biopharma Ltd (NASDAQ:RDHL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RDHL is 40. 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 negative signal and 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately RDHL wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RDHL investors were disappointed as the stock returned 0% since the end of March (through 6/11) 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 most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.

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