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Did Hedge Funds Drop The Ball On Casa Therapeutics Inc (CARA) ?

Nina Todic

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Casa Therapeutics Inc (NASDAQ:CARA) makes for a good investment right now.

Casa Therapeutics Inc (NASDAQ:CARA) was in 9 hedge funds' portfolios at the end of the fourth quarter of 2018. CARA shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 11 hedge funds in our database with CARA positions at the end of the previous quarter. Our calculations also showed that cara isn't among the 30 most popular stocks among hedge funds.

According to most investors, hedge funds are seen as unimportant, outdated investment tools of the past. While there are over 8000 funds trading at the moment, We look at the elite of this group, around 750 funds. These investment experts preside over the lion's share of all hedge funds' total asset base, and by tailing their highest performing picks, Insider Monkey has figured out numerous investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Izzy Englander of MILLENNIUM MANAGEMENT

Let's view the new hedge fund action regarding Casa Therapeutics Inc (NASDAQ:CARA).

How are hedge funds trading Casa Therapeutics Inc (NASDAQ:CARA)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in CARA a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CARA Positions

Among these funds, Renaissance Technologies held the most valuable stake in Casa Therapeutics Inc (NASDAQ:CARA), which was worth $5.4 million at the end of the fourth quarter. On the second spot was Marshall Wace LLP which amassed $4.3 million worth of shares. Moreover, Millennium Management, DAFNA Capital Management, and Citadel Investment Group were also bullish on Casa Therapeutics Inc (NASDAQ:CARA), allocating a large percentage of their portfolios to this stock.

Seeing as Casa Therapeutics Inc (NASDAQ:CARA) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of hedgies that elected to cut their entire stakes in the third quarter. It's worth mentioning that Ori Hershkovitz's Nexthera Capital dumped the largest investment of the 700 funds monitored by Insider Monkey, totaling an estimated $17.7 million in stock, and James A. Silverman's Opaleye Management was right behind this move, as the fund said goodbye to about $3.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let's also examine hedge fund activity in other stocks similar to Casa Therapeutics Inc (NASDAQ:CARA). These stocks are First Community Bankshares Inc (NASDAQ:FCBC), National CineMedia, Inc. (NASDAQ:NCMI), ADTRAN, Inc. (NASDAQ:ADTN), and Precision Drilling Corp (NYSE:PDS). All of these stocks' market caps are closest to CARA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCBC,3,8781,-1 NCMI,19,30087,4 ADTN,15,37702,7 PDS,14,29983,-1 Average,12.75,26638,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $17 million in CARA's case. National CineMedia, Inc. (NASDAQ:NCMI) is the most popular stock in this table. On the other hand First Community Bankshares Inc (NASDAQ:FCBC) is the least popular one with only 3 bullish hedge fund positions. Casa Therapeutics Inc (NASDAQ:CARA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CARA as the stock returned 36.2% and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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