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Hedge Funds Are Piling Into CareDx, Inc. (CDNA)

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In this article we will take a look at whether hedge funds think CareDx, Inc. (NASDAQ:CDNA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is CareDx, Inc. (NASDAQ:CDNA) ready to rally soon? Investors who are in the know were taking a bullish view. The number of long hedge fund bets increased by 5 in recent months. CareDx, Inc. (NASDAQ:CDNA) was in 28 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CDNA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 23 hedge funds in our database with CDNA holdings at the end of March.

If you'd ask most investors, hedge funds are viewed as underperforming, outdated investment vehicles of years past. While there are greater than 8000 funds in operation at the moment, We hone in on the elite of this group, about 850 funds. These hedge fund managers administer most of the smart money's total capital, and by keeping an eye on their inimitable equity investments, Insider Monkey has come up with a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind we're going to review the key hedge fund action surrounding CareDx, Inc. (NASDAQ:CDNA).

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

At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in CDNA a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CDNA A Good Stock To Buy?
Is CDNA A Good Stock To Buy?

Among these funds, ARK Investment Management held the most valuable stake in CareDx, Inc. (NASDAQ:CDNA), which was worth $417.7 million at the end of the second quarter. On the second spot was Matrix Capital Management which amassed $159.2 million worth of shares. Casdin Capital, D E Shaw, 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 Casdin Capital allocated the biggest weight to CareDx, Inc. (NASDAQ:CDNA), around 2.77% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, dishing out 2.14 percent of its 13F equity portfolio to CDNA.

As one would reasonably expect, specific money managers were breaking ground themselves. Intrinsic Edge Capital, managed by Mark Coe, initiated the biggest position in CareDx, Inc. (NASDAQ:CDNA). Intrinsic Edge Capital had $16 million invested in the company at the end of the quarter. Richard Driehaus's Driehaus Capital also made a $15.5 million investment in the stock during the quarter. The other funds with brand new CDNA positions are Steve Cohen's Point72 Asset Management, Brad Farber's Atika Capital, and Guy Levy's Soleus Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as CareDx, Inc. (NASDAQ:CDNA) but similarly valued. These stocks are National Fuel Gas Company (NYSE:NFG), Air Lease Corp (NYSE:AL), RLI Corp. (NYSE:RLI), Blackstone Mortgage Trust Inc (NYSE:BXMT), Antero Resources Corp (NYSE:AR), UP Fintech Holding Limited (NASDAQ:TIGR), and Highwoods Properties Inc (NYSE:HIW). This group of stocks' market caps match CDNA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFG,12,132151,-4 AL,22,677778,-5 RLI,15,195173,1 BXMT,12,185212,-4 AR,33,841084,0 TIGR,16,208731,2 HIW,14,77096,-6 Average,17.7,331032,-2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $331 million. That figure was $1019 million in CDNA's case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand National Fuel Gas Company (NYSE:NFG) is the least popular one with only 12 bullish hedge fund positions. CareDx, Inc. (NASDAQ:CDNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CDNA is 78.1. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately CDNA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CDNA were disappointed as the stock returned -22.4% since the end of June (through 10/15) 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.