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Do Hedge Funds Love Cullinan Oncology, Inc. (CGEM)?

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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Cullinan Oncology, Inc. (NASDAQ:CGEM) based on that data.

Cullinan Oncology, Inc. (NASDAQ:CGEM) shareholders have witnessed a decrease in support from the world's most elite money managers recently. Cullinan Oncology, Inc. (NASDAQ:CGEM) was in 19 hedge funds' portfolios at the end of June. The all time high for this statistic is 21. Our calculations also showed that CGEM isn't among the 30 most popular stocks among hedge funds (click for Q2 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. 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 79 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.

Seth Klarman of Baupost Group
Seth Klarman of Baupost Group

Seth Klarman of Baupost Group

Now we're going to take a look at the key hedge fund action regarding Cullinan Oncology, Inc. (NASDAQ:CGEM).

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

Heading into the third quarter of 2021, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CGEM over the last 24 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey's hedge fund database, Baupost Group, managed by Seth Klarman, holds the biggest position in Cullinan Oncology, Inc. (NASDAQ:CGEM). Baupost Group has a $46.3 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is OrbiMed Advisors, holding a $29.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management, James E. Flynn's Deerfield Management and Mark Lampert's Biotechnology Value Fund / BVF Inc. In terms of the portfolio weights assigned to each position SilverArc Capital allocated the biggest weight to Cullinan Oncology, Inc. (NASDAQ:CGEM), around 0.87% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, designating 0.71 percent of its 13F equity portfolio to CGEM.

Since Cullinan Oncology, Inc. (NASDAQ:CGEM) has witnessed falling interest from hedge fund managers, we can see that there lies a certain "tier" of hedgies who sold off their entire stakes heading into Q3. It's worth mentioning that Albert Cha and Frank Kung's Vivo Capital dropped the largest position of all the hedgies followed by Insider Monkey, comprising an estimated $10.4 million in stock, and Bihua Chen's Cormorant Asset Management was right behind this move, as the fund sold off about $6.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q3.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Cullinan Oncology, Inc. (NASDAQ:CGEM) but similarly valued. We will take a look at DHT Holdings Inc (NYSE:DHT), NextGen Healthcare, Inc. (NASDAQ:NXGN), Renalytix plc (NASDAQ:RNLX), Personalis, Inc. (NASDAQ:PSNL), Cryolife Inc (NYSE:CRY), Huron Consulting Group Inc. (NASDAQ:HURN), and Accel Entertainment, Inc. (NYSE:ACEL). All of these stocks' market caps are closest to CGEM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DHT,20,122986,-2 NXGN,17,40593,1 RNLX,10,28656,3 PSNL,15,225976,2 CRY,12,77134,4 HURN,9,23150,1 ACEL,10,181749,-2 Average,13.3,100035,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $100 million. That figure was $216 million in CGEM's case. DHT Holdings Inc (NYSE:DHT) is the most popular stock in this table. On the other hand Huron Consulting Group Inc. (NASDAQ:HURN) is the least popular one with only 9 bullish hedge fund positions. Cullinan Oncology, Inc. (NASDAQ:CGEM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CGEM is 75.6. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately CGEM wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CGEM were disappointed as the stock returned -13.7% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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