We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) and determine whether hedge funds skillfully traded this stock.
Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) has experienced an increase in hedge fund interest lately. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) was in 35 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 25 hedge funds in our database with CNST holdings at the end of March. Our calculations also showed that CNST isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
At the moment there are numerous methods stock market investors put to use to value their stock investments. Two of the most under-the-radar methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outperform the S&P 500 by a very impressive margin (see the details here).
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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind let's go over the new hedge fund action surrounding Constellation Pharmaceuticals, Inc. (NASDAQ:CNST).
Hedge fund activity in Constellation Pharmaceuticals, Inc. (NASDAQ:CNST)
At second quarter's end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CNST over the last 20 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), with a stake worth $120.2 million reported as of the end of September. Trailing Avoro Capital Advisors (venBio Select Advisor) was Great Point Partners, which amassed a stake valued at $104.6 million. Partner Fund Management, Casdin Capital, and Deerfield 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 Great Point Partners allocated the biggest weight to Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), around 8.36% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, setting aside 5.15 percent of its 13F equity portfolio to CNST.
As one would reasonably expect, some big names were breaking ground themselves. EcoR1 Capital, managed by Oleg Nodelman, created the most valuable position in Constellation Pharmaceuticals, Inc. (NASDAQ:CNST). EcoR1 Capital had $25.2 million invested in the company at the end of the quarter. Farallon Capital also made a $10.5 million investment in the stock during the quarter. The other funds with brand new CNST positions are Nathan Fischel's DAFNA Capital Management, Matthew L Pinz's Pinz Capital, and Krishen Sud's Sivik Global Healthcare.
Let's now take a look at hedge fund activity in other stocks similar to Constellation Pharmaceuticals, Inc. (NASDAQ:CNST). We will take a look at Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), TTM Technologies, Inc. (NASDAQ:TTMI), Matson Inc. (NYSE:MATX), Office Properties Income Trust (NASDAQ:OPI), Broadmark Realty Capital Inc. (NYSE:BRMK), Studio City International Holdings Limited (NYSE:MSC), and Materion Corp (NYSE:MTRN). All of these stocks' market caps resemble CNST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRHC,8,34469,1 TTMI,18,85469,8 MATX,9,14403,6 OPI,11,20932,1 BRMK,8,89428,-7 MSC,3,192446,0 MTRN,14,98184,-4 Average,10.1,76476,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.1 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $453 million in CNST's case. TTM Technologies, Inc. (NASDAQ:TTMI) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) is more popular among hedge funds. Our overall hedge fund sentiment score for CNST is 90. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately CNST wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CNST were disappointed as the stock returned -30% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.