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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Charles & Colvard, Ltd. (NASDAQ:CTHR).
Is CTHR a good stock to buy? Charles & Colvard, Ltd. (NASDAQ:CTHR) was in 4 hedge funds' portfolios at the end of March. The all time high for this statistic was previously 3. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CTHR shareholders have witnessed an increase in hedge fund sentiment recently. There were 2 hedge funds in our database with CTHR holdings at the end of December. Our calculations also showed that CTHR 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.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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. Keeping this in mind we're going to take a peek at the new hedge fund action encompassing Charles & Colvard, Ltd. (NASDAQ:CTHR).
Do Hedge Funds Think CTHR Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CTHR over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the largest position in Charles & Colvard, Ltd. (NASDAQ:CTHR), worth close to $7.3 million, accounting for less than 0.1%% of its total 13F portfolio. Coming in second is Millennium Management, led by Israel Englander, holding a $0.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise John Overdeck and David Siegel's Two Sigma Advisors, Ken Griffin's Citadel Investment Group and . In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Charles & Colvard, Ltd. (NASDAQ:CTHR), around 0.01% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, earmarking 0.0008 percent of its 13F equity portfolio to CTHR.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, created the largest position in Charles & Colvard, Ltd. (NASDAQ:CTHR). Millennium Management had $0.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $0.3 million position during the quarter.
Let's now review hedge fund activity in other stocks similar to Charles & Colvard, Ltd. (NASDAQ:CTHR). We will take a look at Volt Information Sciences, Inc. (NYSE:VOLT), Kubient, Inc. (NASDAQ:KBNT), Galmed Pharmaceuticals Ltd (NASDAQ:GLMD), Lion Group Holding Ltd. (NASDAQ:LGHL), The Alkaline Water Company Inc. (NASDAQ:WTER), Guaranty Federal Bancshares, Inc. (NASDAQ:GFED), and First National Corporation (NASDAQ:FXNC). This group of stocks' market caps match CTHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VOLT,5,7856,2 KBNT,2,563,0 GLMD,7,11925,1 LGHL,3,2774,-1 WTER,3,423,-1 GFED,2,1543,0 FXNC,2,8689,0 Average,3.4,4825,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.4 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $8 million in CTHR's case. Galmed Pharmaceuticals Ltd (NASDAQ:GLMD) is the most popular stock in this table. On the other hand Kubient, Inc. (NASDAQ:KBNT) is the least popular one with only 2 bullish hedge fund positions. Charles & Colvard, Ltd. (NASDAQ:CTHR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CTHR is 57. 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately CTHR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CTHR were disappointed as the stock returned -5.1% since the end of March (through 6/11) 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.