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Cerus Corporation (CERS): Are Hedge Funds Right About This Stock?

Abigail Fisher

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Cerus Corporation (NASDAQ:CERS).

Cerus Corporation (NASDAQ:CERS) has experienced a decrease in activity from the world's largest hedge funds in recent months. 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 below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

If you'd ask most investors, hedge funds are assumed to be slow, outdated financial vehicles of years past. While there are over 8000 funds in operation at the moment, We hone in on the aristocrats of this group, approximately 750 funds. These hedge fund managers control the lion's share of the smart money's total capital, and by following their unrivaled picks, Insider Monkey has revealed numerous investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_338175" align="aligncenter" width="500"] Felix Baker of Baker Bros.[/caption]

Felix Baker - Baker Bros.

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. Let's check out the recent hedge fund action surrounding Cerus Corporation (NASDAQ:CERS).

What have hedge funds been doing with Cerus Corporation (NASDAQ:CERS)?

Heading into the fourth quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -38% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CERS over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

The largest stake in Cerus Corporation (NASDAQ:CERS) was held by Baker Bros. Advisors, which reported holding $55.4 million worth of stock at the end of September. It was followed by Rima Senvest Management with a $10.5 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and GLG Partners. In terms of the portfolio weights assigned to each position Rima Senvest Management allocated the biggest weight to Cerus Corporation (NASDAQ:CERS), around 0.9% of its 13F portfolio. Baker Bros. Advisors is also relatively very bullish on the stock, designating 0.38 percent of its 13F equity portfolio to CERS.

Seeing as Cerus Corporation (NASDAQ:CERS) has witnessed bearish sentiment from the aggregate hedge fund industry, it's safe to say that there was a specific group of hedgies that decided to sell off their entire stakes last quarter. Intriguingly, Steve Cohen's Point72 Asset Management said goodbye to the biggest investment of the "upper crust" of funds watched by Insider Monkey, worth about $2.7 million in stock. Renaissance Technologies, also dropped its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Cerus Corporation (NASDAQ:CERS). These stocks are Tutor Perini Corp (NYSE:TPC), RadNet Inc. (NASDAQ:RDNT), Uxin Limited (NASDAQ:UXIN), and Banc of California, Inc. (NYSE:BANC). This group of stocks' market caps resemble CERS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TPC,9,6194,3 RDNT,14,72325,3 UXIN,4,23965,1 BANC,13,84719,-1 Average,10,46801,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $84 million in CERS's case. RadNet Inc. (NASDAQ:RDNT) is the most popular stock in this table. On the other hand Uxin Limited (NASDAQ:UXIN) is the least popular one with only 4 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately CERS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CERS investors were disappointed as the stock returned -15.9% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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