The 13F filings for the September quarter might be considered outdated by some market participants, as more than two months have already passed since the end of the quarter. Leaving the timing of 13Fs aside, some tend to believe that because these quarterly filings do not disclose hedge funds’ short positions, investors should ignore them (our research has proven that people who share this line of thought have surely deprived themselves of great investment opportunities). To reduce the ambiguity, one can focus on tracking long-focused investment vehicles instead. Similarly, one can also track 13D, 13G and Form 4 filings submitted by smart money investors, which tend to provide up-to-date insights about hedge funds’ prominent positions in certain companies. For that reason, this article will discuss two filings submitted with the SEC by investors monitored by Insider Monkey.
In a Schedule 13G filing, Steve Cohen’s Point72 Asset Management reported owning 1.41 million shares of Cara Therapeutics Inc. (NASDAQ:CARA), which accounted for 5.2% of the company’s outstanding shares. Cohen’s family office owned a mere 24,800 shares of the company as of September 30. The clinical-stage biopharmaceutical company focuses on the development of new chemical products that target the body’s peripheral nervous system in order to relieve pain and pruritus. Shares of Cara Therapeutics Inc. (NASDAQ:CARA) had advanced by more than 100% through the end of September, when the sell-off in biotechnology stocks kicked off. Nevertheless, the stock is still 38% in the green year-to-date, and will most likely continue to be guided by investors’ expectations for the success of its product candidates in the upcoming quarters. The company’s leading product candidate is intravenous, or I.V. CR845, which is designed to alleviate postoperative pain without causing many of the side effects associated with currently-marketed pain therapeutics. Cara Therapeutics started the Phase III program for this drug with patients undergoing abdominal surgeries back in September, but also intends to start additional Phase III trials in the first half of 2016.
14 hedge funds from our database had stakes in the biopharmaceutical company at the end of the September quarter, up from 12 registered at the end of the quarter prior to that. These investors owned 11.50% of the company’s stock on September 30, while the value of their stakes grew to $44.79 million from $22.81 million quarter-over-quarter. Israel Englander’s Millennium Management upped its stake in Cara Therapeutics Inc. (NASDAQ:CARA) by 15% during the September quarter, ending the three-month period with 822,400 shares.
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At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
Let’s move on to the next page of this article, where we disclose the latest move by H Partners Management.
According to a Form 4 filing, Rehan Jaffer’s H Partners Management cut its position in Six Flags Entertainment Corp (NYSE:SIX) by 441,563 shares over the past several days, selling the shares at a weighted average price of $53.17. The fund still holds 14.95 million shares of the regional theme park operator, which has seen its shares advance by 23% this year, extending their two-year and five-year returns to 43% and 277%, respectively. Therefore, it appears that H Partners is trying to gradually take some profits off the table from its investment in the company, which may be an appropriate move considering the company’s rich trailing price-to-earnings ratio. Six Flags Entertainment Corp (NYSE:SIX) has a trailing P/E ratio of 44.63, which is significantly above the average of 22.71 for the companies included in the S&P 500 benchmark. The company has delivered strong revenue growth this year despite facing foreign currency headwinds. Six Flags reported revenue of $1.05 billion for the nine-month period that ended September 30, up by $54.4 million or 5% relative to the same quarter of last year. The increased attendance stands behind this top-line growth, which was offset by a decrease in total revenue per capita due to the weaker Mexican Peso and Canadian Dollar (Six Flags operates one park in Mexico City and one in Montreal, along with an additional 16 parks that are located in the United States).
The number of smart money investors that we track which own long positions in the theme park operator declined to 29 from 33 during the September quarter, while the value of their positions shrank by less than 1% to $1.05 billion. Even so, these hedge fund investors held slightly more than 24% of the company’s outstanding common stock on September 30. Amy Minella’s Cardinal Capital owns 1.03 million shares of Six Flags Entertainment Corp (NYSE:SIX) as of the end of the third quarter.
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