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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding CRISPR Therapeutics AG (NASDAQ:CRSP).
Is CRSP stock a buy? CRISPR Therapeutics AG (NASDAQ:CRSP) was in 34 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CRSP investors should be aware of an increase in enthusiasm from smart money in recent months. There were 26 hedge funds in our database with CRSP holdings at the end of September. Our calculations also showed that CRSP isn't among the 30 most popular stocks among hedge funds (click for Q4 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 look at the key hedge fund action encompassing CRISPR Therapeutics AG (NASDAQ:CRSP).
Do Hedge Funds Think CRSP Is A Good Stock To Buy Now?
At Q4's end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from one quarter earlier. On the other hand, there were a total of 30 hedge funds with a bullish position in CRSP a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, ARK Investment Management held the most valuable stake in CRISPR Therapeutics AG (NASDAQ:CRSP), which was worth $1594.3 million at the end of the fourth quarter. On the second spot was OrbiMed Advisors which amassed $69.2 million worth of shares. Two Sigma Advisors, Valiant Capital, and D E Shaw 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 ARK Investment Management allocated the biggest weight to CRISPR Therapeutics AG (NASDAQ:CRSP), around 4.25% of its 13F portfolio. Valiant Capital is also relatively very bullish on the stock, earmarking 2.38 percent of its 13F equity portfolio to CRSP.
Consequently, specific money managers were leading the bulls' herd. Hitchwood Capital Management, managed by James Crichton, established the biggest position in CRISPR Therapeutics AG (NASDAQ:CRSP). Hitchwood Capital Management had $11.5 million invested in the company at the end of the quarter. Ryan Caldwell's Chiron Investment Management also made a $9.9 million investment in the stock during the quarter. The following funds were also among the new CRSP investors: Jerome Pfund and Michael Sjostrom's Sectoral Asset Management, Israel Englander's Millennium Management, and Michael Gelband's ExodusPoint Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as CRISPR Therapeutics AG (NASDAQ:CRSP) but similarly valued. These stocks are XPO Logistics Inc (NYSE:XPO), F5 Networks, Inc. (NASDAQ:FFIV), AbCellera Biologics Inc. (NASDAQ:ABCL), Universal Display Corporation (NASDAQ:OLED), Guidewire Software Inc (NYSE:GWRE), Pegasystems Inc. (NASDAQ:PEGA), and LKQ Corporation (NASDAQ:LKQ). This group of stocks' market caps are similar to CRSP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XPO,40,2981368,1 FFIV,34,1131637,-2 ABCL,25,2316582,25 OLED,24,93963,4 GWRE,35,1577177,1 PEGA,32,2099135,0 LKQ,50,1611034,-1 Average,34.3,1687271,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $1687 million. That figure was $2010 million in CRSP's case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Universal Display Corporation (NASDAQ:OLED) is the least popular one with only 24 bullish hedge fund positions. CRISPR Therapeutics AG (NASDAQ:CRSP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CRSP is 59.2. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and surpassed the market again by 0.4 percentage points. Unfortunately CRSP wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); CRSP investors were disappointed as the stock returned -22% since the end of December (through 4/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.