In this article we will check out the progression of hedge fund sentiment towards Cerecor Inc. (NASDAQ:CERC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Cerecor Inc. (NASDAQ:CERC) a bargain? The best stock pickers are turning bullish. The number of bullish hedge fund bets advanced by 1 in recent months. Our calculations also showed that CERC 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
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. 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_189632" align="aligncenter" width="400"] David Harding of Winton Capital Management[/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 we're going to take a peek at the new hedge fund action surrounding Cerecor Inc. (NASDAQ:CERC).
What does smart money think about Cerecor Inc. (NASDAQ:CERC)?
At Q1's end, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in CERC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Armistice Capital was the largest shareholder of Cerecor Inc. (NASDAQ:CERC), with a stake worth $69.8 million reported as of the end of September. Trailing Armistice Capital was Opaleye Management, which amassed a stake valued at $5.5 million. Ikarian Capital, Millennium Management, and Citadel Investment Group 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 Armistice Capital allocated the biggest weight to Cerecor Inc. (NASDAQ:CERC), around 4.32% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, designating 1.45 percent of its 13F equity portfolio to CERC.
Now, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most valuable position in Cerecor Inc. (NASDAQ:CERC). Millennium Management had $0.2 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $0.1 million investment in the stock during the quarter.
Let's check out hedge fund activity in other stocks similar to Cerecor Inc. (NASDAQ:CERC). We will take a look at Orrstown Financial Services (NASDAQ:ORRF), CalAmp Corp. (NASDAQ:CAMP), Pacific City Financial Corporation (NASDAQ:PCB), and OncoCyte Corporation (NYSE:OCX). This group of stocks' market caps are closest to CERC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ORRF,3,6992,1 CAMP,12,93779,3 PCB,6,12407,0 OCX,5,48092,1 Average,6.5,40318,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $77 million in CERC's case. CalAmp Corp. (NASDAQ:CAMP) is the most popular stock in this table. On the other hand Orrstown Financial Services (NASDAQ:ORRF) is the least popular one with only 3 bullish hedge fund positions. Cerecor Inc. (NASDAQ:CERC) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on CERC as the stock returned 30.2% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.