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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Cortexyme, Inc. (NASDAQ:CRTX).
Is Cortexyme, Inc. (NASDAQ:CRTX) a buy, sell, or hold? The smart money is betting on the stock. The number of long hedge fund bets increased by 5 lately. Our calculations also showed that CRTX 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). CRTX was in 6 hedge funds' portfolios at the end of the first quarter of 2020. There were 1 hedge funds in our database with CRTX positions at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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David E. Shaw of D.E. Shaw[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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 glance at the latest hedge fund action encompassing Cortexyme, Inc. (NASDAQ:CRTX).
What does smart money think about Cortexyme, Inc. (NASDAQ:CRTX)?
At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 500% from one quarter earlier. By comparison, 0 hedge funds held shares or bullish call options in CRTX a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Cortexyme, Inc. (NASDAQ:CRTX), which was worth $11.5 million at the end of the third quarter. On the second spot was Millennium Management which amassed $1.2 million worth of shares. Ikarian Capital, D E Shaw, and Renaissance Technologies 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 Ikarian Capital allocated the biggest weight to Cortexyme, Inc. (NASDAQ:CRTX), around 0.09% of its 13F portfolio. Citadel Investment Group is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to CRTX.
Consequently, specific money managers have jumped into Cortexyme, Inc. (NASDAQ:CRTX) headfirst. Millennium Management, managed by Israel Englander, established the biggest position in Cortexyme, Inc. (NASDAQ:CRTX). Millennium Management had $1.2 million invested in the company at the end of the quarter. Neil Shahrestani's Ikarian Capital also made a $1.1 million investment in the stock during the quarter. The following funds were also among the new CRTX investors: D. E. Shaw's D E Shaw, Renaissance Technologies, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now review hedge fund activity in other stocks similar to Cortexyme, Inc. (NASDAQ:CRTX). We will take a look at AtriCure Inc. (NASDAQ:ATRC), Green Dot Corporation (NYSE:GDOT), Brooge Energy Limited (NASDAQ:BROG), and American Eagle Outfitters Inc. (NYSE:AEO). This group of stocks' market caps are similar to CRTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATRC,20,185400,2 GDOT,22,376626,-1 BROG,7,49414,4 AEO,26,133187,2 Average,18.75,186157,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $15 million in CRTX's case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand Brooge Energy Limited (NASDAQ:BROG) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Cortexyme, Inc. (NASDAQ:CRTX) is even less popular than BROG. Hedge funds dodged a bullet by taking a bearish stance towards CRTX. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately CRTX wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CRTX investors were disappointed as the stock returned -0.8% during the second quarter (through June 10th) 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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.