The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded CM Life Sciences, Inc. (NASDAQ:CMLF) based on those filings.
Is CMLF a good stock to buy? The best stock pickers were getting more optimistic. The number of bullish hedge fund positions moved up by 15 in recent months. CM Life Sciences, Inc. (NASDAQ:CMLF) was in 30 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CMLF 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.
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Do Hedge Funds Think CMLF Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CMLF over the last 23 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, ARK Investment Management was the largest shareholder of CM Life Sciences, Inc. (NASDAQ:CMLF), with a stake worth $63 million reported as of the end of March. Trailing ARK Investment Management was SB Management, which amassed a stake valued at $50.3 million. SB Management, Alkeon Capital Management, and Sachem Head Capital 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 Chescapmanager LLC allocated the biggest weight to CM Life Sciences, Inc. (NASDAQ:CMLF), around 0.64% of its 13F portfolio. Sachem Head Capital is also relatively very bullish on the stock, designating 0.6 percent of its 13F equity portfolio to CMLF.
As aggregate interest increased, key hedge funds have jumped into CM Life Sciences, Inc. (NASDAQ:CMLF) headfirst. ARK Investment Management, managed by Catherine D. Wood, created the most valuable position in CM Life Sciences, Inc. (NASDAQ:CMLF). ARK Investment Management had $63 million invested in the company at the end of the quarter. Masayoshi Son's SB Management also initiated a $50.3 million position during the quarter. The following funds were also among the new CMLF investors: Masayoshi Son's SB Management, Panayotis Takis Sparaggis's Alkeon Capital Management, and Scott Ferguson's Sachem Head Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as CM Life Sciences, Inc. (NASDAQ:CMLF) but similarly valued. These stocks are Northfield Bancorp Inc (NASDAQ:NFBK), Collegium Pharmaceutical Inc (NASDAQ:COLL), Vanda Pharmaceuticals Inc. (NASDAQ:VNDA), Adaptimmune Therapeutics plc (NASDAQ:ADAP), Tucows Inc. (NYSE:TCX), Byline Bancorp, Inc. (NYSE:BY), and Avidity Biosciences, Inc. (NASDAQ:RNA). This group of stocks' market values are similar to CMLF's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFBK,6,37059,-3 COLL,15,211903,-5 VNDA,18,207370,-2 ADAP,15,343461,-2 TCX,7,84763,0 BY,8,28220,1 RNA,15,219671,-2 Average,12,161778,-1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $341 million in CMLF's case. Vanda Pharmaceuticals Inc. (NASDAQ:VNDA) is the most popular stock in this table. On the other hand Northfield Bancorp Inc (NASDAQ:NFBK) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks CM Life Sciences, Inc. (NASDAQ:CMLF) is more popular among hedge funds. Our overall hedge fund sentiment score for CMLF is 90. 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 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Unfortunately CMLF wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CMLF were disappointed as the stock returned -8% since the end of the first quarter (through 7/2) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.