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 CRISPR Therapeutics AG (NASDAQ:CRSP).
CRISPR Therapeutics AG (NASDAQ:CRSP) shareholders have witnessed an increase in hedge fund sentiment in recent months. CRSP was in 31 hedge funds' portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with CRSP positions at the end of the previous quarter. Our calculations also showed that CRSP 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.
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 S&P 500 ETFs by 51 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a peek at the fresh hedge fund action encompassing CRISPR Therapeutics AG (NASDAQ:CRSP).
How have hedgies been trading CRISPR Therapeutics AG (NASDAQ:CRSP)?
At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in CRSP a year ago. With hedge funds' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in CRISPR Therapeutics AG (NASDAQ:CRSP) was held by Cormorant Asset Management, which reported holding $26.7 million worth of stock at the end of September. It was followed by OrbiMed Advisors with a $23.4 million position. Other investors bullish on the company included Renaissance Technologies, Valiant Capital, and Farallon Capital. In terms of the portfolio weights assigned to each position Valiant Capital allocated the biggest weight to CRISPR Therapeutics AG (NASDAQ:CRSP), around 2.06% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, designating 1.7 percent of its 13F equity portfolio to CRSP.
As one would reasonably expect, key money managers were breaking ground themselves. Casdin Capital, managed by Eli Casdin, created the biggest position in CRISPR Therapeutics AG (NASDAQ:CRSP). Casdin Capital had $11.3 million invested in the company at the end of the quarter. Arsani William's Logos Capital also initiated a $4.5 million position during the quarter. The other funds with brand new CRSP positions are Thomas Bailard's Bailard Inc, Oleg Nodelman's EcoR1 Capital, and Greg Eisner's Engineers Gate Manager.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as CRISPR Therapeutics AG (NASDAQ:CRSP) but similarly valued. We will take a look at Inovalon Holdings Inc (NASDAQ:INOV), Radian Group Inc (NYSE:RDN), bluebird bio Inc (NASDAQ:BLUE), and Ultragenyx Pharmaceutical Inc (NASDAQ:RARE). This group of stocks' market values match CRSP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INOV,15,71699,-1 RDN,28,121169,-1 BLUE,27,286752,-6 RARE,18,236444,0 Average,22,179016,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $198 million in CRSP's case. Radian Group Inc (NYSE:RDN) is the most popular stock in this table. On the other hand Inovalon Holdings Inc (NASDAQ:INOV) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks CRISPR Therapeutics AG (NASDAQ:CRSP) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on CRSP as the stock returned 52.3% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.