Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Coherus Biosciences Inc (NASDAQ:CHRS) changed recently.
Coherus Biosciences Inc (NASDAQ:CHRS) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds' portfolios at the end of June. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Studio City International Holdings Limited (NYSE:MSC), Whiting Petroleum Corporation (NYSE:WLL), and ForeScout Technologies, Inc. (NASDAQ:FSCT) to gather more data points. Our calculations also showed that CHRS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a gander at the key hedge fund action regarding Coherus Biosciences Inc (NASDAQ:CHRS).
What have hedge funds been doing with Coherus Biosciences Inc (NASDAQ:CHRS)?
At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in CHRS 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, Rock Springs Capital Management held the most valuable stake in Coherus Biosciences Inc (NASDAQ:CHRS), which was worth $41.5 million at the end of the second quarter. On the second spot was Deerfield Management which amassed $37.1 million worth of shares. Moreover, Hound Partners, Partner Fund Management, and Adage Capital Management were also bullish on Coherus Biosciences Inc (NASDAQ:CHRS), allocating a large percentage of their portfolios to this stock.
Seeing as Coherus Biosciences Inc (NASDAQ:CHRS) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedge funds that slashed their positions entirely by the end of the second quarter. At the top of the heap, Steve Cohen's Point72 Asset Management sold off the biggest stake of the "upper crust" of funds tracked by Insider Monkey, valued at about $12.5 million in stock. Kamran Moghtaderi's fund, Eversept Partners, also dumped its stock, about $1.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Coherus Biosciences Inc (NASDAQ:CHRS) but similarly valued. These stocks are Studio City International Holdings Limited (NYSE:MSC), Whiting Petroleum Corporation (NYSE:WLL), ForeScout Technologies, Inc. (NASDAQ:FSCT), and Redwood Trust, Inc. (NYSE:RWT). All of these stocks' market caps are similar to CHRS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSC,4,237508,0 WLL,23,280994,-2 FSCT,18,191567,-5 RWT,13,97744,-2 Average,14.5,201953,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $263 million in CHRS's case. Whiting Petroleum Corporation (NYSE:WLL) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Coherus Biosciences Inc (NASDAQ:CHRS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CHRS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CHRS were disappointed as the stock returned -8.3% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.