The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) and determine whether the smart money was really smart about this stock.
Is Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) ready to rally soon? Prominent investors were getting less optimistic. The number of bullish hedge fund positions decreased by 1 recently. Our calculations also showed that CRNX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the new hedge fund action encompassing Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX).
How have hedgies been trading Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX)?
At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the fourth quarter of 2019. On the other hand, there were a total of 9 hedge funds with a bullish position in CRNX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Vivo Capital, managed by Albert Cha and Frank Kung, holds the number one position in Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX). Vivo Capital has a $48.8 million position in the stock, comprising 4.4% of its 13F portfolio. The second largest stake is held by Joseph Edelman of Perceptive Advisors, with a $38 million position; 1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish contain Samuel Isaly’s OrbiMed Advisors, Peter Kolchinsky’s RA Capital Management and James A. Silverman’s Opaleye Management. In terms of the portfolio weights assigned to each position Vivo Capital allocated the biggest weight to Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), around 4.42% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, earmarking 3.96 percent of its 13F equity portfolio to CRNX.
Due to the fact that Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers who were dropping their positions entirely by the end of the first quarter. Interestingly, Steve Cohen’s Point72 Asset Management said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, worth about $0.9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.5 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) but similarly valued. We will take a look at Star Group L.P. (NYSE:SGU), Rubius Therapeutics, Inc. (NASDAQ:RUBY), Catchmark Timber Trust Inc (NYSE:CTT), and Schnitzer Steel Industries, Inc. (NASDAQ:SCHN). All of these stocks’ market caps are closest to CRNX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGU | 8 | 65781 | 1 |
| RUBY | 4 | 878 | -1 |
| CTT | 11 | 41172 | -4 |
| SCHN | 11 | 7324 | 1 |
| Average | 8.5 | 28789 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $166 million in CRNX’s case. Catchmark Timber Trust Inc (NYSE:CTT) is the most popular stock in this table. On the other hand Rubius Therapeutics, Inc. (NASDAQ:RUBY) is the least popular one with only 4 bullish hedge fund positions. Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately CRNX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CRNX were disappointed as the stock returned 19.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
