World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) was in 7 hedge funds' portfolios at the end of December. CRNX has seen a decrease in hedge fund interest recently. There were 9 hedge funds in our database with CRNX positions at the end of the previous quarter. Our calculations also showed that CRNX isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's review the new hedge fund action regarding Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX).
What does the smart money think about Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX)?
At Q4's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CRNX over the last 14 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) was held by Vivo Capital, which reported holding $113.7 million worth of stock at the end of December. It was followed by Perceptive Advisors with a $77.6 million position. Other investors bullish on the company included OrbiMed Advisors, RA Capital Management, and Adage Capital Management.
Because Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) has witnessed declining sentiment from the smart money, it's easy to see that there was a specific group of hedgies that slashed their full holdings by the end of the third quarter. At the top of the heap, Benjamin A. Smith's Laurion Capital Management cut the largest investment of the "upper crust" of funds monitored by Insider Monkey, totaling an estimated $3.4 million in stock. Michael Platt and William Reeves's fund, BlueCrest Capital Mgmt., also cut its stock, about $0.4 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) but similarly valued. These stocks are Resolute Forest Products Inc (NYSE:RFP), Multi-Color Corporation (NASDAQ:LABL), MTS Systems Corporation (NASDAQ:MTSC), and Nabors Industries Ltd. (NYSE:NBR). This group of stocks' market values are closest to CRNX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RFP,27,318569,5 LABL,10,17888,5 MTSC,12,104204,0 NBR,32,120080,-7 Average,20.25,140185,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $320 million in CRNX's case. Nabors Industries Ltd. (NYSE:NBR) is the most popular stock in this table. On the other hand Multi-Color Corporation (NASDAQ:LABL) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) is even less popular than LABL. Hedge funds dodged a bullet by taking a bearish stance towards CRNX. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CRNX wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); CRNX investors were disappointed as the stock returned -19.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.