It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in ContraFect Corp (NASDAQ:CFRX).
Is ContraFect Corp (NASDAQ:CFRX) the right pick for your portfolio? It looks like money managers are becoming hopeful. The number of bullish hedge fund positions among the investors in our database went up by four last quarter. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Peregrine Pharmaceuticals (NASDAQ:PPHM), KLR Energy Acquisition Corp (NASDAQ:KLRE), and PRGX Global Inc (NASDAQ:PRGX) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, we’re going to take a peek at the new action regarding ContraFect Corp (NASDAQ:CFRX).
Hedge fund activity in ContraFect Corp (NASDAQ:CFRX)
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 67% over the quarter. The graph below displays the number of hedge funds with bullish position in CFRX over the last five quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Baker Bros. Advisors, led by Julian Baker and Felix Baker, holds the largest position in ContraFect Corp (NASDAQ:CFRX). Baker Bros. Advisors has a $10 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Bihua Chen’s Cormorant Asset Management, which holds a $9.5 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Phill Gross and Robert Atchinson’s Adage Capital Management and Kevin Kotler’s Broadfin Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names were leading the bulls’ herd. Baker Bros. Advisors initiated the largest position in ContraFect Corp (NASDAQ:CFRX). Anand Parekh’s Alyeska Investment Group also made a $3.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael S. WeissáandáLindsay A. Rosenwald’s Opus Point Partners Management and Millennium Management, one of the 10 largest hedge funds in the world.
Let’s now take a look at hedge fund activity in other stocks similar to ContraFect Corp (NASDAQ:CFRX). We will take a look at Peregrine Pharmaceuticals (NASDAQ:PPHM), KLR Energy Acquisition Corp (NASDAQ:KLRE), PRGX Global Inc (NASDAQ:PRGX), and pSivida Corp. (NASDAQ:PSDV). This group of stocks’ market caps are similar to CFRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PPHM | 8 | 1681 | -2 |
| KLRE | 5 | 19992 | 0 |
| PRGX | 6 | 27935 | -1 |
| PSDV | 6 | 19879 | 0 |
As you can see these stocks had an average of six funds with bullish positions and the average amount invested in these stocks was $17 million, versus $37 million in CFRX’s case. Peregrine Pharmaceuticals (NASDAQ:PPHM) is the most popular stock in this table. On the other hand KLR Energy Acquisition Corp (NASDAQ:KLRE) is the least popular one with only five funds holding shares. Compared to these stocks ContraFect Corp (NASDAQ:CFRX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: none
