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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Capricor Therapeutics, Inc. (NASDAQ:CAPR).
Is Capricor Therapeutics, Inc. (NASDAQ:CAPR) an outstanding investment today? Money managers are becoming more confident. The number of long hedge fund bets advanced by 1 recently. Our calculations also showed that CAPR 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.
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 44 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Jim Simons Founder of Renaissance Technologies[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the key hedge fund action encompassing Capricor Therapeutics, Inc. (NASDAQ:CAPR).
How are hedge funds trading Capricor Therapeutics, Inc. (NASDAQ:CAPR)?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CAPR over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Capricor Therapeutics, Inc. (NASDAQ:CAPR) was held by Armistice Capital, which reported holding $0.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.1 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Consequently, specific money managers were leading the bulls' herd. Armistice Capital, managed by Steven Boyd, initiated the most valuable position in Capricor Therapeutics, Inc. (NASDAQ:CAPR). Armistice Capital had $0.3 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks similar to Capricor Therapeutics, Inc. (NASDAQ:CAPR). We will take a look at AgEagle Aerial Systems, Inc. (NYSE:UAVS), China Recycling Energy Corp. (NASDAQ:CREG), Novus Therapeutics, Inc. (NASDAQ:NVUS), and TSR, Inc. (NASDAQ:TSRI). This group of stocks' market caps are closest to CAPR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UAVS,1,7,-1 CREG,2,137,1 NVUS,4,2055,0 TSRI,1,238,0 Average,2,609,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in CAPR's case. Novus Therapeutics, Inc. (NASDAQ:NVUS) is the most popular stock in this table. On the other hand AgEagle Aerial Systems, Inc. (NYSE:UAVS) is the least popular one with only 1 bullish hedge fund positions. Capricor Therapeutics, Inc. (NASDAQ:CAPR) is not the most popular stock in this group but hedge fund interest is still above 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on CAPR as the stock returned 349.2% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.