Hedge Funds Are Getting More Bullish On CareDx, Inc. (CDNA)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about CareDx, Inc. (NASDAQ:CDNA).

CareDx, Inc. (NASDAQ:CDNA) investors should be aware of an increase in support from the world’s most elite money managers in recent months. CareDx, Inc. (NASDAQ:CDNA) was in 29 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 28 hedge funds in our database with CDNA positions at the end of the second quarter. Our calculations also showed that CDNA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind let’s take a gander at the latest hedge fund action encompassing CareDx, Inc. (NASDAQ:CDNA).

Mario Gabelli of GAMCO Investors

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

At third quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter of 2021. By comparison, 25 hedge funds held shares or bullish call options in CDNA a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, ARK Investment Management, managed by Catherine D. Wood, holds the number one position in CareDx, Inc. (NASDAQ:CDNA). ARK Investment Management has a $216.1 million position in the stock, comprising 0.5% of its 13F portfolio. On ARK Investment Management’s heels is Matrix Capital Management, led by David Goel and Paul Ferri, holding a $110.3 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Eli Casdin’s Casdin Capital, D. E. Shaw’s D E Shaw and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to CareDx, Inc. (NASDAQ:CDNA), around 1.88% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, earmarking 1.31 percent of its 13F equity portfolio to CDNA.

As industrywide interest jumped, some big names have been driving this bullishness. Renaissance Technologies, assembled the largest position in CareDx, Inc. (NASDAQ:CDNA). Renaissance Technologies had $18.9 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $2 million investment in the stock during the quarter. The other funds with brand new CDNA positions are Peter Algert’s Algert Global, Mario Gabelli’s GAMCO Investors, and Greg Eisner’s Engineers Gate Manager.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CareDx, Inc. (NASDAQ:CDNA) but similarly valued. We will take a look at Enel Chile S.A. (NYSE:ENIC), EnLink Midstream LLC (NYSE:ENLC), Bank of Hawaii Corporation (NYSE:BOH), White Mountains Insurance Group Ltd (NYSE:WTM), CorVel Corporation (NASDAQ:CRVL), Navient Corp (NASDAQ:NAVI), and Welbilt, Inc. (NYSE:WBT). This group of stocks’ market valuations resemble CDNA’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $638 million in CDNA’s case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 7 bullish hedge fund positions. CareDx, Inc. (NASDAQ:CDNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CDNA is 71.5. 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 positive signal but 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately CDNA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CDNA were disappointed as the stock returned -31.9% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

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