Is Cortexyme, Inc. (NASDAQ:CRTX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Cortexyme, Inc. (NASDAQ:CRTX) the right pick for your portfolio? Investors who are in the know were reducing their bets on the stock. The number of bullish hedge fund positions decreased by 5 lately. Cortexyme, Inc. (NASDAQ:CRTX) was in 3 hedge funds' portfolios at the end of March. The all time high for this statistic is 8. Our calculations also showed that CRTX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. 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 check out the key hedge fund action surrounding Cortexyme, Inc. (NASDAQ:CRTX).
Do Hedge Funds Think CRTX Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -63% from the fourth quarter of 2020. By comparison, 6 hedge funds held shares or bullish call options in CRTX a year ago. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Cortexyme, Inc. (NASDAQ:CRTX), which was worth $1.6 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $1.2 million worth of shares. Two Sigma Advisors was 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 Two Sigma Advisors allocated the biggest weight to Cortexyme, Inc. (NASDAQ:CRTX), around 0.0011% of its 13F portfolio. Citadel Investment Group is also relatively very bullish on the stock, dishing out 0.0004 percent of its 13F equity portfolio to CRTX.
Seeing as Cortexyme, Inc. (NASDAQ:CRTX) has experienced bearish sentiment from hedge fund managers, we can see that there is a sect of money managers who were dropping their positions entirely heading into Q2. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP dropped the biggest investment of the 750 funds tracked by Insider Monkey, totaling about $1 million in stock, and Neil Shahrestani's Ikarian Capital was right behind this move, as the fund dumped about $0.4 million worth. These moves are interesting, as total hedge fund interest was cut by 5 funds heading into Q2.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cortexyme, Inc. (NASDAQ:CRTX) but similarly valued. We will take a look at Coherus Biosciences Inc (NASDAQ:CHRS), Westport Fuel Systems Inc. (NASDAQ:WPRT), Apogee Enterprises, Inc. (NASDAQ:APOG), Tactile Systems Technology, Inc. (NASDAQ:TCMD), Summit Hotel Properties Inc (NYSE:INN), Annexon, Inc. (NASDAQ:ANNX), and BioXcel Therapeutics, Inc. (NASDAQ:BTAI). This group of stocks' market caps are closest to CRTX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CHRS,23,144394,3 WPRT,15,56843,2 APOG,9,23117,1 TCMD,9,13931,-4 INN,13,31309,1 ANNX,10,264052,-1 BTAI,6,25008,-5 Average,12.1,79808,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $2 million in CRTX's case. Coherus Biosciences Inc (NASDAQ:CHRS) is the most popular stock in this table. On the other hand BioXcel Therapeutics, Inc. (NASDAQ:BTAI) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Cortexyme, Inc. (NASDAQ:CRTX) is even less popular than BTAI. Our overall hedge fund sentiment score for CRTX is 11.3. 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. Hedge funds clearly dropped the ball on CRTX as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on CRTX as the stock returned 35.1% since Q1 (through June 11th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.