Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the third quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 9.9 percentage points through the end of November. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) has seen an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that CPRX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most shareholders, hedge funds are assumed to be underperforming, outdated financial vehicles of years past. While there are over 8000 funds trading today, Our researchers look at the leaders of this group, around 750 funds. These investment experts direct bulk of all hedge funds’ total asset base, and by monitoring their best stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outrun the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Felix Baker of Baker Bros.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s go over the key hedge fund action regarding Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX).
Hedge fund activity in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX)
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in CPRX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) was held by Consonance Capital Management, which reported holding $94.9 million worth of stock at the end of September. It was followed by Mangrove Partners with a $13.3 million position. Other investors bullish on the company included Baker Bros. Advisors, Broadfin Capital, and PDT Partners. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), around 9.39% of its 13F portfolio. Mangrove Partners is also relatively very bullish on the stock, earmarking 1.61 percent of its 13F equity portfolio to CPRX.
With a general bullishness amongst the heavyweights, some big names have jumped into Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) headfirst. PDT Partners, managed by Peter Muller, assembled the largest position in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). PDT Partners had $1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new CPRX investors: Donald Sussman’s Paloma Partners, Joel Greenblatt’s Gotham Asset Management, and Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) but similarly valued. We will take a look at Team, Inc. (NYSE:TISI), Antares Pharma Inc (NASDAQ:ATRS), Peapack-Gladstone Financial Corp (NASDAQ:PGC), and Ichor Holdings, Ltd. (NASDAQ:ICHR). All of these stocks’ market caps match CPRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TISI | 13 | 89501 | 1 |
| ATRS | 11 | 27672 | 1 |
| PGC | 16 | 59858 | 1 |
| ICHR | 8 | 53884 | 0 |
| Average | 12 | 57729 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $124 million in CPRX’s case. Peapack-Gladstone Financial Corp (NASDAQ:PGC) is the most popular stock in this table. On the other hand Ichor Holdings, Ltd. (NASDAQ:ICHR) is the least popular one with only 8 bullish hedge fund positions. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CPRX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CPRX investors were disappointed as the stock returned -12.6% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
