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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) based on that data.
Is CPRX a good stock to buy now? The best stock pickers were taking a bearish view. The number of long hedge fund bets shrunk by 5 in recent months. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. Our calculations also showed that CPRX 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). There were 22 hedge funds in our database with CPRX positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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.
David Harding of Winton Capital Management
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 fresh hedge fund action surrounding Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX).
Do Hedge Funds Think CPRX Is A Good Stock To Buy Now?
At third quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the second quarter of 2020. By comparison, 12 hedge funds held shares or bullish call options in CPRX a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Armistice Capital, managed by Steven Boyd, holds the largest position in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). Armistice Capital has a $29.7 million position in the stock, comprising 1.1% of its 13F portfolio. Coming in second is Nathaniel August of Mangrove Partners, with a $9 million position; 1.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money that hold long positions include Chuck Royce's Royce & Associates, Noam Gottesman's GLG Partners and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Mangrove Partners allocated the biggest weight to Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), around 1.14% of its 13F portfolio. Armistice Capital is also relatively very bullish on the stock, designating 1.08 percent of its 13F equity portfolio to CPRX.
Since Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that decided to sell off their full holdings in the third quarter. Intriguingly, James A. Silverman's Opaleye Management said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, valued at an estimated $5.3 million in stock, and Noah Levy and Eugene Dozortsev's Newtyn Management was right behind this move, as the fund said goodbye to about $4.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds in the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) but similarly valued. We will take a look at CytomX Therapeutics, Inc. (NASDAQ:CTMX), Hooker Furniture Corporation (NASDAQ:HOFT), Americas Gold and Silver Corporation (NYSE:USAS), OneWater Marine Inc. (NASDAQ:ONEW), Del Taco Restaurants Inc (NASDAQ:TACO), Ares Commercial Real Estate Corp (NYSE:ACRE), and Noodles & Co (NASDAQ:NDLS). This group of stocks' market caps resemble CPRX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTMX,20,74703,-2 HOFT,10,84583,2 USAS,4,6087,-2 ONEW,11,38634,6 TACO,15,21195,3 ACRE,9,24591,-1 NDLS,19,67028,1 Average,12.6,45260,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $58 million in CPRX's case. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is the most popular stock in this table. On the other hand Americas Gold and Silver Corporation (NYSE:USAS) is the least popular one with only 4 bullish hedge fund positions. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CPRX is 63.8. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CPRX as the stock returned 29% since the end of Q3 (through 12/14) 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.