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Did Hedge Funds Make The Right Call On Cerus Corporation (CERS) ?

Debasis Saha
·6 min read

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCerus Corporation (NASDAQ:CERS) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Cerus Corporation (NASDAQ:CERS) the right pick for your portfolio? The smart money was buying. The number of long hedge fund positions advanced by 5 in recent months. Our calculations also showed that CERS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). CERS was in 17 hedge funds' portfolios at the end of March. There were 12 hedge funds in our database with CERS holdings at the end of the previous quarter. 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.

James Flynn Deerfield Management
James Flynn Deerfield Management

James E. Flynn of Deerfield Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let's view the latest hedge fund action regarding Cerus Corporation (NASDAQ:CERS).

How are hedge funds trading Cerus Corporation (NASDAQ:CERS)?

At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 42% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CERS over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CERS A Good Stock To Buy?
Is CERS A Good Stock To Buy?

Among these funds, Baker Bros. Advisors held the most valuable stake in Cerus Corporation (NASDAQ:CERS), which was worth $63.8 million at the end of the third quarter. On the second spot was Deerfield Management which amassed $10.3 million worth of shares. Millennium Management, Intrinsic Edge 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 Intrinsic Edge Capital allocated the biggest weight to Cerus Corporation (NASDAQ:CERS), around 1.13% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, earmarking 0.8 percent of its 13F equity portfolio to CERS.

As one would reasonably expect, key money managers were breaking ground themselves. Deerfield Management, managed by James E. Flynn, initiated the largest position in Cerus Corporation (NASDAQ:CERS). Deerfield Management had $10.3 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $8.5 million position during the quarter. The other funds with brand new CERS positions are Efrem Kamen's Pura Vida Investments, Steve Cohen's Point72 Asset Management, and Donald Sussman's Paloma Partners.

Let's also examine hedge fund activity in other stocks similar to Cerus Corporation (NASDAQ:CERS). We will take a look at Teekay Tankers Ltd. (NYSE:TNK), Oyster Point Pharma, Inc. (NASDAQ:OYST), Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT), and Berkshire Hills Bancorp, Inc. (NYSE:BHLB). This group of stocks' market valuations are similar to CERS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TNK,21,66975,2 OYST,4,1827,1 PHAT,6,311386,-1 BHLB,15,23209,6 Average,11.5,100849,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $101 million. That figure was $106 million in CERS's case. Teekay Tankers Ltd. (NYSE:TNK) is the most popular stock in this table. On the other hand Oyster Point Pharma, Inc. (NASDAQ:OYST) is the least popular one with only 4 bullish hedge fund positions. Cerus Corporation (NASDAQ:CERS) is not the most popular stock in this group but hedge fund interest is still above average. 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 18.6% in 2020 through July 27th but still beat the market by 17.1 percentage points. Hedge funds were also right about betting on CERS as the stock returned 46.2% since Q1 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.

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