How do we determine whether Vericel Corp (NASDAQ:VCEL) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Vericel Corp (NASDAQ:VCEL) going to take off soon? Investors who are in the know are taking a bearish view. The number of bullish hedge fund bets dropped by 1 lately. Our calculations also showed that VCEL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). VCEL was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. There were 17 hedge funds in our database with VCEL positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
James E. Flynn of Deerfield Management
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. We’re going to take a glance at the recent hedge fund action surrounding Vericel Corp (NASDAQ:VCEL).
How have hedgies been trading Vericel Corp (NASDAQ:VCEL)?
At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in VCEL a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Consonance Capital Management held the most valuable stake in Vericel Corp (NASDAQ:VCEL), which was worth $55.2 million at the end of the third quarter. On the second spot was Deerfield Management which amassed $31.5 million worth of shares. Driehaus Capital, Archon Capital Management, and Intrinsic Edge Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to Vericel Corp (NASDAQ:VCEL), around 5.46% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, dishing out 1.63 percent of its 13F equity portfolio to VCEL.
Since Vericel Corp (NASDAQ:VCEL) has faced a decline in interest from the smart money, logic holds that there is a sect of hedge funds who sold off their positions entirely heading into Q4. Interestingly, Steve Cohen’s Point72 Asset Management said goodbye to the biggest position of the 750 funds followed by Insider Monkey, worth about $4.1 million in stock. Donald Sussman’s fund, Paloma Partners, also dumped its stock, about $0.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to Vericel Corp (NASDAQ:VCEL). These stocks are Cytokinetics, Inc. (NASDAQ:CYTK), Winmark Corporation (NASDAQ:WINA), HomeStreet Inc (NASDAQ:HMST), and Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD). This group of stocks’ market valuations resemble VCEL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CYTK | 18 | 130436 | 4 |
| WINA | 9 | 95629 | 3 |
| HMST | 14 | 31095 | 5 |
| GLDD | 24 | 104208 | 2 |
| Average | 16.25 | 90342 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $134 million in VCEL’s case. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is the most popular stock in this table. On the other hand Winmark Corporation (NASDAQ:WINA) is the least popular one with only 9 bullish hedge fund positions. Vericel Corp (NASDAQ:VCEL) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on VCEL as the stock returned 23.2% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
