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Did Hedge Funds Drop The Ball On Cellectis SA (CLLS) ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Cellectis SA (NASDAQ:CLLS).

Cellectis SA (NASDAQ:CLLS) has experienced a decrease in enthusiasm from smart money lately. Our calculations also showed that CLLS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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’ 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the new hedge fund action surrounding Cellectis SA (NASDAQ:CLLS).

How are hedge funds trading Cellectis SA (NASDAQ:CLLS)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the previous quarter. By comparison, 13 hedge funds held shares or bullish call options in CLLS a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management has the number one position in Cellectis SA (NASDAQ:CLLS), worth close to $6 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $5.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism contain Israel Englander’s Millennium Management, Steve Cohen’s Point72 Asset Management and Sander Gerber’s Hudson Bay Capital Management. In terms of the portfolio weights assigned to each position Water Street Capital allocated the biggest weight to Cellectis SA (NASDAQ:CLLS), around 0.05% of its 13F portfolio. Hudson Bay Capital Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to CLLS.

Since Cellectis SA (NASDAQ:CLLS) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that slashed their positions entirely in the third quarter. At the top of the heap, Steven Boyd’s Armistice Capital dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $12.5 million in stock, and Minhua Zhang’s Weld Capital Management was right behind this move, as the fund dropped about $0.3 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cellectis SA (NASDAQ:CLLS) but similarly valued. These stocks are Syros Pharmaceuticals, Inc. (NASDAQ:SYRS), Scorpio Bulkers Inc (NYSE:SALT), Tejon Ranch Company (NYSE:TRC), and CVR Partners LP (NYSE:UAN). This group of stocks’ market caps match CLLS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYRS 9 89221 -4
SALT 11 26198 1
TRC 12 74498 2
UAN 4 44172 0
Average 9 58522 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $21 million in CLLS’s case. Tejon Ranch Company (NYSE:TRC) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 4 bullish hedge fund positions. Cellectis SA (NASDAQ:CLLS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CLLS as the stock returned 33.7% during the first two months of Q4 and outperformed the market by an even larger margin.

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

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