How Does Cara Therapeutics Inc (CARA) Stack Up Against Its Peers?

There are several ways to beat the market, and investing in small-cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small-cap picks. In this article, we use hedge fund filing data to analyze Cara Therapeutics Inc (NASDAQ:CARA).

Cara Therapeutics Inc (NASDAQ:CARA) shareholders have witnessed an increase in enthusiasm from smart money of late. There were 8 hedge funds in our database with CARA positions at the end of the second quarter, 1 fewer than there were a quarter later. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Zagg Inc (NASDAQ:ZAGG), Abraxas Petroleum Corp. (NASDAQ:AXAS), and Neff Corp (NYSE:NEFF) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about Cara Therapeutics Inc (NASDAQ:CARA)?

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a 13% rise from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in CARA at the beginning of this year, so hedge fund ownership of the stock is still down sharply in 2016, after a steep fall in Q2. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Opaleye Management, led by James A. Silverman, holds the most valuable position in Cara Therapeutics Inc (NASDAQ:CARA). Opaleye Management has a $5.6 million position in the stock, comprising 2.9% of its 13F portfolio. Sitting at the No. 2 spot is DAFNA Capital Management, led by Nathan Fischel, holding a $2.2 million position; 1.6% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include Jim Simons’ Renaissance Technologies, Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners, and Mike Vranos’ Ellington. We should note that GRT Capital Partners is among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

Now, key hedge funds were leading the bulls’ herd. Renaissance Technologies, one of the largest hedge funds in the world, assembled the largest position in Cara Therapeutics Inc (NASDAQ:CARA). Renaissance Technologies had $2.1 million invested in the company at the end of the quarter. Ellington also made a $0.8 million investment in the stock during the quarter. Ken Griffin’s Citadel Investment Group was also a new CARA investor during the quarter.

Let’s also examine hedge fund activity in other stocks similar to Cara Therapeutics Inc (NASDAQ:CARA). These stocks are Zagg Inc (NASDAQ:ZAGG), Abraxas Petroleum Corp. (NASDAQ:AXAS), Neff Corp (NYSE:NEFF), and Park City Group, Inc. (NYSEAMEX:PCYG). This group of stocks’ market caps match CARA’s market cap.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $13 million in CARA’s case. Zagg Inc (NASDAQ:ZAGG) is the most popular stock in this table. On the other hand Neff Corp (NYSE:NEFF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Cara Therapeutics Inc (NASDAQ:CARA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None