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Were Hedge Funds Right About Rigel Pharmaceuticals, Inc. (RIGL)?

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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL).

Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) was in 17 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 20. RIGL has seen a decrease in support from the world's most elite money managers lately. There were 19 hedge funds in our database with RIGL positions at the end of the fourth quarter. Our calculations also showed that RIGL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

At the moment there are plenty of indicators market participants use to analyze publicly traded companies. A pair of the less utilized indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite money managers can outperform the S&P 500 by a solid amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Justin John Ferayorni - Tamarack Capital Management
Justin John Ferayorni - Tamarack Capital Management

Justin John Ferayorni of Tamarack Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 go over the latest hedge fund action encompassing Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL).

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

Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RIGL over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Tamarack Capital Management was the largest shareholder of Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), with a stake worth $28.6 million reported as of the end of March. Trailing Tamarack Capital Management was Rock Springs Capital Management, which amassed a stake valued at $16.2 million. Millennium Management, Citadel Investment Group, and Hudson Bay Capital Management 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 Tamarack Capital Management allocated the biggest weight to Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL), around 5.86% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, designating 0.36 percent of its 13F equity portfolio to RIGL.

Since Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of funds who were dropping their entire stakes last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the largest stake of the 750 funds monitored by Insider Monkey, comprising an estimated $4.4 million in stock. Jeremy Green's fund, Redmile Group, also cut its stock, about $2.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). We will take a look at SunCoke Energy, Inc (NYSE:SXC), Valhi, Inc. (NYSE:VHI), Bank First Corp (NASDAQ:BFC), Genius Brands International, Inc. (NASDAQ:GNUS), Aspen Aerogels Inc (NYSE:ASPN), Ontrak, Inc. (NASDAQ:OTRK), and Magenta Therapeutics, Inc. (NASDAQ:MGTA). This group of stocks' market values resemble RIGL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SXC,22,86952,3 VHI,4,6649,0 BFC,4,1520,2 GNUS,6,5422,0 ASPN,13,88783,4 OTRK,7,11834,-6 MGTA,17,123130,1 Average,10.4,46327,0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.4 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $100 million in RIGL's case. SunCoke Energy, Inc (NYSE:SXC) is the most popular stock in this table. On the other hand Valhi, Inc. (NYSE:VHI) is the least popular one with only 4 bullish hedge fund positions. Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RIGL is 64.6. 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. 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on RIGL, though not to the same extent, as the stock returned 20.5% since Q1 (through July 23rd) and outperformed the market as well.

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