Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Cempra Inc (NASDAQ:CEMP)? The smart money sentiment can provide an answer to this question.
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Cempra Inc investors should pay attention to an increase in hedge fund sentiment of late. CEMP was in 21 hedge funds’ portfolio at the end of September. There were 19 hedge funds in our database with CEMP positions at the end of the previous quarter. At the end of this article we will also compare CEMP to other stocks including Belmond Ltd (NYSE:BEL), Fiesta Restaurant Group Inc (NASDAQ:FRGI), and SAGE Therapeutics Inc (NASDAQ:SAGE) to get a better sense of its popularity.
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At the moment there are a multitude of gauges investors have at their disposal to analyze publicly traded companies. A pair of the most innovative gauges are hedge fund and insider trading activity. Our research have shown that, historically, those who follow the top picks of the top fund managers can outperform the broader indices by a very impressive amount (see the details here).
With all of this in mind, we’re going to check out the fresh action surrounding Cempra Inc (NASDAQ:CEMP).
How have hedgies been trading Cempra Inc (NASDAQ:CEMP)?
Heading into Q4, a total of 21 of the hedge funds tracked by Insider Monkey were long in this stock, a change of 11% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially.
Of the funds tracked by Insider Monkey, Aisling Capital, the private equity shop managed by Dennis Purcell, holds the number one position in Cempra Inc (NASDAQ:CEMP). Aisling Capital has a $61.1 million position in the stock, comprising 10.7% of its 13F portfolio. The second most bullish hedge fund manager is Millennium Management, led by Israel Englander, holding a $17.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions comprise healthcare guru Joseph Edelman’s Perceptive Advisors, James Dondero’s Highland Capital Management and Columbus Circle Investors.
As one would reasonably expect, some big names have jumped into Cempra Inc (NASDAQ:CEMP) headfirst. Columbus Circle Investors created the largest position in Cempra Inc (NASDAQ:CEMP). Columbus Circle Investors had $12.7 million invested in the company at the end of the quarter. John A. Levin’s Levin Capital Strategies also made a $11.1 million investment in the stock during the quarter. The following funds were also among the new CEMP investors: Arthur B Cohen and Joseph Healey’s Healthcor Management, Mark Kingdon’s Kingdon Capital, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also take a look at hedge fund activity in other stocks similar to Cempra Inc (NASDAQ:CEMP). These stocks are Belmond Ltd (NYSE:BEL), Fiesta Restaurant Group Inc (NASDAQ:FRGI), SAGE Therapeutics Inc (NASDAQ:SAGE), and Itron, Inc. (NASDAQ:ITRI). All of these stocks’ market caps are similar to CEMP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BEL | 19 | 79230 | -1 |
| FRGI | 18 | 40791 | 1 |
| SAGE | 17 | 744209 | -4 |
| ITRI | 16 | 200409 | 0 |
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. Belmond Ltd (NYSE:BEL) is the most popular stock in this table. On the other hand Itron, Inc. (NASDAQ:ITRI) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Cempra Inc (NASDAQ:CEMP) is more popular among hedge funds. Considering that hedge funds are fond of this stock and new hedge funds were getting into this name, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
