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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Collegium Pharmaceutical Inc (NASDAQ:COLL) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Collegium Pharmaceutical Inc (NASDAQ:COLL) has experienced a decrease in support from the world's most elite money managers in recent months. Collegium Pharmaceutical Inc (NASDAQ:COLL) was in 20 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. There were 21 hedge funds in our database with COLL holdings at the end of March. Our calculations also showed that COLL isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
In the eyes of most market participants, hedge funds are viewed as underperforming, outdated financial tools of the past. While there are greater than 8000 funds in operation at present, We choose to focus on the top tier of this club, around 850 funds. It is estimated that this group of investors control the lion's share of the hedge fund industry's total asset base, and by keeping an eye on their highest performing stock picks, Insider Monkey has uncovered various investment strategies that have historically outrun the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind let's take a look at the key hedge fund action encompassing Collegium Pharmaceutical Inc (NASDAQ:COLL).
Hedge fund activity in Collegium Pharmaceutical Inc (NASDAQ:COLL)
At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in COLL a year ago. 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 Collegium Pharmaceutical Inc (NASDAQ:COLL), which was worth $36 million at the end of the third quarter. On the second spot was Camber Capital Management which amassed $35 million worth of shares. Rubric Capital Management, Renaissance Technologies, and Rock Springs Capital Management 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 Rubric Capital Management allocated the biggest weight to Collegium Pharmaceutical Inc (NASDAQ:COLL), around 3.88% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, setting aside 2 percent of its 13F equity portfolio to COLL.
Due to the fact that Collegium Pharmaceutical Inc (NASDAQ:COLL) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there were a few fund managers who sold off their positions entirely in the second quarter. Interestingly, Albert Cha and Frank Kung's Vivo Capital cut the largest investment of the "upper crust" of funds watched by Insider Monkey, worth close to $7.3 million in stock, and Richard Driehaus's Driehaus Capital was right behind this move, as the fund cut about $5.2 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Collegium Pharmaceutical Inc (NASDAQ:COLL) but similarly valued. We will take a look at Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), Green Brick Partners Inc (NASDAQ:GRBK), Dillard's, Inc. (NYSE:DDS), Atreca, Inc. (NASDAQ:BCEL), Clearwater Paper Corp (NYSE:CLW), Nordic American Tankers Ltd (NYSE:NAT), and Matthews International Corp (NASDAQ:MATW). This group of stocks' market caps match COLL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GLDD,17,82736,-3 GRBK,21,332707,2 DDS,17,42116,4 BCEL,9,151048,1 CLW,14,57751,9 NAT,5,6514,-7 MATW,18,49822,9 Average,14.4,103242,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $200 million in COLL's case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand Nordic American Tankers Ltd (NYSE:NAT) is the least popular one with only 5 bullish hedge fund positions. Collegium Pharmaceutical Inc (NASDAQ:COLL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COLL is 32.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on COLL as the stock returned 19% during Q3 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.