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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cerus Corporation (NASDAQ:CERS).
Is CERS a good stock to buy now? Money managers were getting less optimistic. The number of bullish hedge fund positions shrunk by 2 recently. Cerus Corporation (NASDAQ:CERS) was in 12 hedge funds' portfolios at the end of September. The all time high for this statistics is 18. Our calculations also showed that CERS isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by more than 66 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. 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.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's take a gander at the latest hedge fund action regarding Cerus Corporation (NASDAQ:CERS).
Do Hedge Funds Think CERS Is A Good Stock To Buy Now?
At third quarter's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CERS over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Baker Bros. Advisors was the largest shareholder of Cerus Corporation (NASDAQ:CERS), with a stake worth $85.8 million reported as of the end of September. Trailing Baker Bros. Advisors was Intrinsic Edge Capital, which amassed a stake valued at $12.9 million. D E Shaw, Millennium Management, and Two Sigma Advisors 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 Intrinsic Edge Capital allocated the biggest weight to Cerus Corporation (NASDAQ:CERS), around 0.87% of its 13F portfolio. Baker Bros. Advisors is also relatively very bullish on the stock, designating 0.34 percent of its 13F equity portfolio to CERS.
Since Cerus Corporation (NASDAQ:CERS) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of fund managers that decided to sell off their positions entirely last quarter. It's worth mentioning that Efrem Kamen's Pura Vida Investments cut the biggest position of all the hedgies tracked by Insider Monkey, totaling close to $3.7 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund cut about $2.5 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Cerus Corporation (NASDAQ:CERS). We will take a look at Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), BP Midstream Partners LP (NYSE:BPMP), TriMas Corp (NASDAQ:TRS), Esperion Therapeutics (NASDAQ:ESPR), BrightSphere Investment Group Inc (NYSE:BSIG), PGT Innovations Inc. (NASDAQ:PGTI), and EVO Payments, Inc. (NASDAQ:EVOP). This group of stocks' market caps are closest to CERS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KNSA,20,212720,2 BPMP,5,8204,2 TRS,14,70904,-3 ESPR,17,222235,-2 BSIG,25,374125,3 PGTI,11,79133,0 EVOP,15,34698,1 Average,15.3,143146,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $113 million in CERS's case. BrightSphere Investment Group Inc (NYSE:BSIG) is the most popular stock in this table. On the other hand BP Midstream Partners LP (NYSE:BPMP) is the least popular one with only 5 bullish hedge fund positions. Cerus Corporation (NASDAQ:CERS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CERS is 40.5. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on CERS as the stock returned 18.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.