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Were Hedge Funds Right About Cutera, Inc. (CUTR)?

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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cutera, Inc. (NASDAQ:CUTR).

Hedge fund interest in Cutera, Inc. (NASDAQ:CUTR) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CUTR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare CUTR to other stocks including Clarus Corporation (NASDAQ:CLAR), Zynex, Inc. (NASDAQ:ZYXI), and Aptose Biosciences Inc (NASDAQ:APTO) to get a better sense of its popularity.

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

BRIDGER MANAGEMENT
BRIDGER MANAGEMENT

Roberto Mignone of Bridger Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind let's take a gander at the new hedge fund action regarding Cutera, Inc. (NASDAQ:CUTR).

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

At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CUTR over the last 23 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey's hedge fund database, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Cutera, Inc. (NASDAQ:CUTR). GAMCO Investors has a $37.5 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $23.7 million position; 0.2% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism consist of J. Daniel Plants's Voce Capital, Renaissance Technologies and Efrem Kamen's Pura Vida Investments. In terms of the portfolio weights assigned to each position Voce Capital allocated the biggest weight to Cutera, Inc. (NASDAQ:CUTR), around 7.36% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, dishing out 0.96 percent of its 13F equity portfolio to CUTR.

Judging by the fact that Cutera, Inc. (NASDAQ:CUTR) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedge funds that slashed their full holdings heading into Q2. At the top of the heap, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors said goodbye to the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $1 million in stock. Cliff Asness's fund, AQR Capital Management, also said goodbye to its stock, about $0.4 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Cutera, Inc. (NASDAQ:CUTR) but similarly valued. We will take a look at Clarus Corporation (NASDAQ:CLAR), Zynex, Inc. (NASDAQ:ZYXI), Aptose Biosciences Inc (NASDAQ:APTO), Electrameccanica Vehicles Corp. (NASDAQ:SOLO), AMMO, Inc. (NASDAQ:POWW), Lizhi Inc. (NASDAQ:LIZI), and iCAD Inc (NASDAQ:ICAD). This group of stocks' market values resemble CUTR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLAR,15,71372,-2 ZYXI,6,8088,-2 APTO,23,173336,2 SOLO,7,11880,0 POWW,7,5716,3 LIZI,3,1018,0 ICAD,15,88505,-1 Average,10.9,51416,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $159 million in CUTR's case. Aptose Biosciences Inc (NASDAQ:APTO) is the most popular stock in this table. On the other hand Lizhi Inc. (NASDAQ:LIZI) is the least popular one with only 3 bullish hedge fund positions. Cutera, Inc. (NASDAQ:CUTR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CUTR is 62.8. 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. 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on CUTR as the stock returned 59.6% since the end of Q1 (through 7/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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