The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded CareDx, Inc. (NASDAQ:CDNA) based on those filings.
CareDx, Inc. (NASDAQ:CDNA) was in 17 hedge funds' portfolios at the end of the first quarter of 2020. CDNA has seen a decrease in enthusiasm from smart money in recent months. There were 25 hedge funds in our database with CDNA positions at the end of the previous quarter. Our calculations also showed that CDNA 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). 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.
[caption id="attachment_26092" align="aligncenter" width="400"] Joel Greenblatt of Gotham Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a look at the fresh hedge fund action regarding CareDx, Inc. (NASDAQ:CDNA).
What have hedge funds been doing with CareDx, Inc. (NASDAQ:CDNA)?
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 -32% from the fourth quarter of 2019. By comparison, 25 hedge funds held shares or bullish call options in CDNA a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Mitchell Blutt's Consonance Capital Management has the biggest position in CareDx, Inc. (NASDAQ:CDNA), worth close to $58.1 million, amounting to 4.3% of its total 13F portfolio. The second most bullish fund manager is Eli Casdin of Casdin Capital, with a $28.3 million position; 3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism comprise D. E. Shaw's D E Shaw, Chuck Royce's Royce & Associates and Mark Coe's Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Consonance Capital Management allocated the biggest weight to CareDx, Inc. (NASDAQ:CDNA), around 4.33% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, setting aside 3 percent of its 13F equity portfolio to CDNA.
Because CareDx, Inc. (NASDAQ:CDNA) has experienced falling interest from hedge fund managers, it's easy to see that there is a sect of hedgies that elected to cut their entire stakes by the end of the first quarter. Interestingly, Peter S. Park's Park West Asset Management sold off the largest position of the "upper crust" of funds followed by Insider Monkey, worth close to $2.1 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund dumped about $2.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds by the end of the first quarter.
Let's check out hedge fund activity in other stocks similar to CareDx, Inc. (NASDAQ:CDNA). These stocks are Cardlytics, Inc. (NASDAQ:CDLX), Standard Motor Products, Inc. (NYSE:SMP), First Busey Corporation (NASDAQ:BUSE), and Sonos, Inc. (NASDAQ:SONO). This group of stocks' market values resemble CDNA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDLX,26,292046,0 SMP,9,68050,-1 BUSE,11,27678,-1 SONO,33,139823,7 Average,19.75,131899,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $145 million in CDNA's case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Standard Motor Products, Inc. (NYSE:SMP) is the least popular one with only 9 bullish hedge fund positions. CareDx, Inc. (NASDAQ:CDNA) is not the least popular stock in this group but hedge fund interest is still below 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on CDNA as the stock returned 54.6% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.