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Is C4 Therapeutics, Inc. (CCCC) A Good Stock To Buy Now?

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about C4 Therapeutics, Inc. (NASDAQ:CCCC).

Is CCCC a good stock to buy? C4 Therapeutics, Inc. (NASDAQ:CCCC) was in 20 hedge funds' portfolios at the end of March. The all time high for this statistic is 22. CCCC investors should pay attention to a decrease in activity from the world's largest hedge funds in recent months. There were 22 hedge funds in our database with CCCC positions at the end of the fourth quarter. Our calculations also showed that CCCC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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' 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 S&P 500 ETFs by 115 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 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.

Peter Kolchinsky of RA Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's review the fresh hedge fund action surrounding C4 Therapeutics, Inc. (NASDAQ:CCCC).

Do Hedge Funds Think CCCC Is A Good Stock To Buy Now?

At first quarter's end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CCCC over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Perceptive Advisors held the most valuable stake in C4 Therapeutics, Inc. (NASDAQ:CCCC), which was worth $116.8 million at the end of the fourth quarter. On the second spot was Cormorant Asset Management which amassed $92.1 million worth of shares. RA Capital Management, Adage Capital Management, and Sphera Global Healthcare Fund 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 Commodore Capital allocated the biggest weight to C4 Therapeutics, Inc. (NASDAQ:CCCC), around 7% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, setting aside 3.09 percent of its 13F equity portfolio to CCCC.

Judging by the fact that C4 Therapeutics, Inc. (NASDAQ:CCCC) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of funds that elected to cut their entire stakes last quarter. Intriguingly, Aaron Cowen's Suvretta Capital Management cut the biggest investment of the "upper crust" of funds tracked by Insider Monkey, valued at close to $4.8 million in stock, and Manfred Yu's Acuta Capital Partners was right behind this move, as the fund dropped about $3.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to C4 Therapeutics, Inc. (NASDAQ:CCCC). These stocks are Omega Flex, Inc. (NASDAQ:OFLX), Century Aluminum Co (NASDAQ:CENX), Rattler Midstream LP (NASDAQ:RTLR), The E.W. Scripps Company (NASDAQ:SSP), Tattooed Chef, Inc. (NASDAQ:TTCF), Vuzix Corporation (NASDAQ:VUZI), and Immunovant, Inc. (NASDAQ:IMVT). This group of stocks' market values resemble CCCC's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OFLX,5,6040,-1 CENX,15,135320,-1 RTLR,6,53990,-1 SSP,22,126334,10 TTCF,10,58744,-1 VUZI,14,74041,4 IMVT,26,131007,-10 Average,14,83639,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $390 million in CCCC's case. Immunovant, Inc. (NASDAQ:IMVT) is the most popular stock in this table. On the other hand Omega Flex, Inc. (NASDAQ:OFLX) is the least popular one with only 5 bullish hedge fund positions. C4 Therapeutics, Inc. (NASDAQ:CCCC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CCCC is 66. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately CCCC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CCCC were disappointed as the stock returned 8% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.