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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Cara Therapeutics Inc (NASDAQ:CARA) and determine whether the smart money was really smart about this stock.
Is Cara Therapeutics Inc (NASDAQ:CARA) a good investment right now? The best stock pickers were getting more optimistic. The number of bullish hedge fund positions advanced by 8 recently. Cara Therapeutics Inc (NASDAQ:CARA) was in 18 hedge funds' portfolios at the end of June. The all time high for this statistics is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CARA 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.
In the eyes of most market participants, hedge funds are viewed as slow, old investment vehicles of the past. While there are over 8000 funds with their doors open at the moment, We look at the elite of this group, around 850 funds. These hedge fund managers direct the lion's share of the smart money's total capital, and by monitoring their top stock picks, Insider Monkey has formulated numerous investment strategies that have historically defeated the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Mark Kingdon of Kingdon Capital
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 real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let's view the fresh hedge fund action surrounding Cara Therapeutics Inc (NASDAQ:CARA).
What have hedge funds been doing with Cara Therapeutics Inc (NASDAQ:CARA)?
Heading into the third quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 80% from the first quarter of 2020. On the other hand, there were a total of 8 hedge funds with a bullish position in CARA a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Among these funds, Farallon Capital held the most valuable stake in Cara Therapeutics Inc (NASDAQ:CARA), which was worth $39.3 million at the end of the third quarter. On the second spot was Chescapmanager LLC which amassed $25.4 million worth of shares. Kingdon Capital, D E Shaw, and DAFNA Capital 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 Chescapmanager LLC allocated the biggest weight to Cara Therapeutics Inc (NASDAQ:CARA), around 4.66% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, setting aside 1.83 percent of its 13F equity portfolio to CARA.
As industrywide interest jumped, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the most outsized position in Cara Therapeutics Inc (NASDAQ:CARA). Millennium Management had $1.8 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $1.5 million position during the quarter. The following funds were also among the new CARA investors: Lawrence Hawkins's Prosight Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Peter Muller's PDT Partners.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Cara Therapeutics Inc (NASDAQ:CARA) but similarly valued. These stocks are Sirius International Insurance Group, Ltd. (NASDAQ:SG), Applied Therapeutics, Inc. (NASDAQ:APLT), RadNet Inc. (NASDAQ:RDNT), Columbus McKinnon Corporation (NASDAQ:CMCO), Tactile Systems Technology, Inc. (NASDAQ:TCMD), Brookline Bancorp, Inc. (NASDAQ:BRKL), and Qutoutiao Inc. (NASDAQ:QTT). This group of stocks' market valuations resemble CARA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SG,2,1371,0 APLT,14,188219,-2 RDNT,14,56208,-2 CMCO,17,41585,1 TCMD,14,45373,1 BRKL,11,40233,3 QTT,5,3499,-4 Average,11,53784,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $104 million in CARA's case. Columbus McKinnon Corporation (NASDAQ:CMCO) is the most popular stock in this table. On the other hand Sirius International Insurance Group, Ltd. (NASDAQ:SG) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Cara Therapeutics Inc (NASDAQ:CARA) is more popular among hedge funds. Our overall hedge fund sentiment score for CARA 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately CARA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CARA were disappointed as the stock returned -25.6% during the third 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.