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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Cutera, Inc. (NASDAQ:CUTR).
Is CUTR a good stock to buy now? Hedge funds were getting more bullish. The number of long hedge fund bets advanced by 4 recently. Cutera, Inc. (NASDAQ:CUTR) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CUTR 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 15 hedge funds in our database with CUTR holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Phillip Gross of Adage Capital
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. With all of this in mind we're going to view the fresh hedge fund action surrounding Cutera, Inc. (NASDAQ:CUTR).
Do Hedge Funds Think CUTR Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 27% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CUTR over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, GAMCO Investors held the most valuable stake in Cutera, Inc. (NASDAQ:CUTR), which was worth $23.8 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.9 million worth of shares. Voce Capital, Archon Capital Management, and Adage 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 Voce Capital allocated the biggest weight to Cutera, Inc. (NASDAQ:CUTR), around 6.58% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, earmarking 1.38 percent of its 13F equity portfolio to CUTR.
As aggregate interest increased, key hedge funds were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most outsized position in Cutera, Inc. (NASDAQ:CUTR). Adage Capital Management had $5.7 million invested in the company at the end of the quarter. Efrem Kamen's Pura Vida Investments also initiated a $3.5 million position during the quarter. The following funds were also among the new CUTR investors: Chuck Royce's Royce & Associates, Mark Coe's Intrinsic Edge Capital, and Michael Gelband's ExodusPoint Capital.
Let's also examine hedge fund activity in other stocks similar to Cutera, Inc. (NASDAQ:CUTR). These stocks are American Superconductor Corporation (NASDAQ:AMSC), Zix Corporation (NASDAQ:ZIXI), New Senior Investment Group Inc (NYSE:SNR), Tiziana Life Sciences plc (NASDAQ:TLSA), Pivotal Investment Corporation II (NYSE:PIC), Legacy Housing Corporation (NASDAQ:LEGH), and Gladstone Land Corporation (NASDAQ:LAND). This group of stocks' market values are similar to CUTR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMSC,8,47220,-3 ZIXI,7,17203,-9 SNR,13,50201,1 TLSA,4,1035,3 PIC,13,68804,1 LEGH,7,14115,3 LAND,7,10307,0 Average,8.4,29841,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.4 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $79 million in CUTR's case. New Senior Investment Group Inc (NYSE:SNR) is the most popular stock in this table. On the other hand Tiziana Life Sciences plc (NASDAQ:TLSA) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Cutera, Inc. (NASDAQ:CUTR) is more popular among hedge funds. Our overall hedge fund sentiment score for CUTR is 89. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on CUTR as the stock returned 13.7% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.