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Hedge Funds Are Crazy About Castlight Health Inc (CSLT)

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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Castlight Health Inc (NYSE:CSLT).

Castlight Health Inc (NYSE:CSLT) has seen an increase in activity from the world's largest hedge funds lately. Castlight Health Inc (NYSE:CSLT) was in 24 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CSLT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

William Martin Raging Capital Management
William Martin Raging Capital Management

William Martin of Raging Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's take a look at the new hedge fund action encompassing Castlight Health Inc (NYSE:CSLT).

Do Hedge Funds Think CSLT Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in CSLT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Raging Capital Management held the most valuable stake in Castlight Health Inc (NYSE:CSLT), which was worth $8.4 million at the end of the fourth quarter. On the second spot was Whetstone Capital Advisors which amassed $8 million worth of shares. Royce & Associates, Renaissance Technologies, and Millennium 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 Raging Capital Management allocated the biggest weight to Castlight Health Inc (NYSE:CSLT), around 16.22% of its 13F portfolio. Whetstone Capital Advisors is also relatively very bullish on the stock, earmarking 1.69 percent of its 13F equity portfolio to CSLT.

Now, specific money managers were breaking ground themselves. Parian Global Management, managed by Zachary Miller, initiated the largest position in Castlight Health Inc (NYSE:CSLT). Parian Global Management had $2.6 million invested in the company at the end of the quarter. John R. Wagner's SCW Capital Management also made a $2 million investment in the stock during the quarter. The other funds with brand new CSLT positions are Thomas E. Claugus's GMT Capital, Greg Martinez's Parkman Healthcare Partners, and Travis Cocke's Voss Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Castlight Health Inc (NYSE:CSLT) but similarly valued. We will take a look at Novan, Inc. (NASDAQ:NOVN), Sharps Compliance Corp. (NASDAQ:SMED), Parke Bancorp, Inc. (NASDAQ:PKBK), Eneti Inc. (NYSE:NETI), ZK International Group Co., Ltd. (NASDAQ:ZKIN), Onconova Therapeutics, Inc. (NASDAQ:ONTX), and MICT, Inc. (NASDAQ:MICT). This group of stocks' market caps resemble CSLT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOVN,4,5028,3 SMED,9,19326,3 PKBK,3,10303,0 NETI,2,4073,0 ZKIN,3,1032,2 ONTX,10,8984,9 MICT,3,2125,-3 Average,4.9,7267,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.9 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $41 million in CSLT's case. Onconova Therapeutics, Inc. (NASDAQ:ONTX) is the most popular stock in this table. On the other hand Eneti Inc. (NYSE:NETI) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Castlight Health Inc (NYSE:CSLT) is more popular among hedge funds. Our overall hedge fund sentiment score for CSLT 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 23.8% in 2021 through July 16th but still managed to beat the market by 7.7 percentage points. Hedge funds were also right about betting on CSLT as the stock returned 48.3% since the end of March (through 7/16) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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