The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Cerus Corporation (NASDAQ:CERS), and what that likely means for the prospects of the company and its stock.
Cerus Corporation (NASDAQ:CERS) was in 15 hedge funds’ portfolios at the end of December. CERS investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 18 hedge funds in our database with CERS positions at the end of the previous quarter. Our calculations also showed that CERS isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to check out the fresh hedge fund action surrounding Cerus Corporation (NASDAQ:CERS).
How are hedge funds trading Cerus Corporation (NASDAQ:CERS)?
Heading into the first quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CERS over the last 14 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Cerus Corporation (NASDAQ:CERS) was held by Baker Bros. Advisors, which reported holding $54.5 million worth of stock at the end of December. It was followed by Rima Senvest Management with a $9.6 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and GLG Partners.
Judging by the fact that Cerus Corporation (NASDAQ:CERS) has witnessed a decline in interest from the smart money, logic holds that there is a sect of hedge funds that decided to sell off their entire stakes in the third quarter. At the top of the heap, David Costen Haley’s HBK Investments sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $0.8 million in stock. Jim Simons’s fund, Renaissance Technologies, also dropped its stock, about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Cerus Corporation (NASDAQ:CERS) but similarly valued. These stocks are Astec Industries, Inc. (NASDAQ:ASTE), EMC Insurance Group Inc. (NASDAQ:EMCI), Unity Biotechnology, Inc. (NASDAQ:UBX), and Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX). This group of stocks’ market valuations resemble CERS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASTE | 10 | 75982 | 0 |
| EMCI | 5 | 21306 | 3 |
| UBX | 2 | 29221 | -2 |
| BLX | 1 | 3668 | 0 |
| Average | 4.5 | 32544 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $91 million in CERS’s case. Astec Industries, Inc. (NASDAQ:ASTE) is the most popular stock in this table. On the other hand Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Cerus Corporation (NASDAQ:CERS) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CERS wasn’t nearly as popular as these 15 stock and hedge funds that were betting on CERS were disappointed as the stock returned 16.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
