Is Coherus Biosciences Inc (NASDAQ:CHRS) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Coherus Biosciences Inc (NASDAQ:CHRS) was in 22 hedge funds’ portfolios at the end of September. CHRS investors should pay attention to a decrease in enthusiasm from smart money of late. There were 27 hedge funds in our database with CHRS holdings at the end of the previous quarter. Our calculations also showed that CHRS 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
James E. Flynn of Deerfield Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the fresh hedge fund action encompassing Coherus Biosciences Inc (NASDAQ:CHRS).
How are hedge funds trading Coherus Biosciences Inc (NASDAQ:CHRS)?
Heading into the fourth quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the second quarter of 2019. By comparison, 23 hedge funds held shares or bullish call options in CHRS a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Rubric Capital Management, managed by David Rosen, holds the largest position in Coherus Biosciences Inc (NASDAQ:CHRS). Rubric Capital Management has a $41.3 million position in the stock, comprising 3.8% of its 13F portfolio. The second largest stake is held by Rock Springs Capital Management, led by Kris Jenner, Gordon Bussard, Graham McPhail, holding a $38.1 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of James E. Flynn’s Deerfield Management, Jonathan Auerbach’s Hound Partners and Christopher James’s Partner Fund Management. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Coherus Biosciences Inc (NASDAQ:CHRS), around 3.95% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, designating 3.78 percent of its 13F equity portfolio to CHRS.
Seeing as Coherus Biosciences Inc (NASDAQ:CHRS) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital sold off the biggest investment of the 750 funds tracked by Insider Monkey, totaling an estimated $9.4 million in stock, and Ori Hershkovitz’s Nexthera Capital was right behind this move, as the fund dropped about $7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Coherus Biosciences Inc (NASDAQ:CHRS) but similarly valued. These stocks are Presidio, Inc. (NASDAQ:PSDO), Hercules Capital, Inc. (NYSE:HTGC), First Busey Corporation (NASDAQ:BUSE), and CorVel Corporation (NASDAQ:CRVL). This group of stocks’ market caps match CHRS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSDO | 22 | 189614 | 3 |
| HTGC | 9 | 23447 | -3 |
| BUSE | 10 | 43773 | -1 |
| CRVL | 14 | 139590 | -1 |
| Average | 13.75 | 99106 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $214 million in CHRS’s case. Presidio, Inc. (NASDAQ:PSDO) is the most popular stock in this table. On the other hand Hercules Capital, Inc. (NYSE:HTGC) is the least popular one with only 9 bullish hedge fund positions. Coherus Biosciences Inc (NASDAQ:CHRS) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 CHRS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CHRS were disappointed as the stock returned -11.2% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
