Did Hedge Funds Drop The Ball On CRISPR Therapeutics AG (CRSP) ?

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at CRISPR Therapeutics AG (NASDAQ:CRSP) from the perspective of those elite funds.

Is CRISPR Therapeutics AG (NASDAQ:CRSP) the right pick for your portfolio? Money managers are buying. The number of bullish hedge fund bets rose by 3 recently. Our calculations also showed that CRSP isn’t among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Oleg Nodelman EcoR1 Capital

We’re going to check out the new hedge fund action surrounding CRISPR Therapeutics AG (NASDAQ:CRSP).

How are hedge funds trading CRISPR Therapeutics AG (NASDAQ:CRSP)?

Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRSP over the last 15 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).


More specifically, EcoR1 Capital was the largest shareholder of CRISPR Therapeutics AG (NASDAQ:CRSP), with a stake worth $67.1 million reported as of the end of March. Trailing EcoR1 Capital was Cormorant Asset Management, which amassed a stake valued at $32.1 million. Farallon Capital, Clough Capital Partners, and Valiant Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were leading the bulls’ herd. GLG Partners, managed by Noam Gottesman, created the biggest position in CRISPR Therapeutics AG (NASDAQ:CRSP). GLG Partners had $1.8 million invested in the company at the end of the quarter. Kamran Moghtaderi’s Eversept Partners also initiated a $1.5 million position during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, Michael S. Weiss and Lindsay A. Rosenwald’s Opus Point Partners Management, and Steve Cohen’s Point72 Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CRISPR Therapeutics AG (NASDAQ:CRSP) but similarly valued. These stocks are ForeScout Technologies, Inc. (NASDAQ:FSCT), Forward Air Corporation (NASDAQ:FWRD), HudBay Minerals Inc (NYSE:HBM), and Avaya Holdings Corp. (NYSE:AVYA). This group of stocks’ market valuations are closest to CRSP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSCT 23 265548 6
FWRD 15 102299 4
HBM 11 295270 -2
AVYA 40 427447 4
Average 22.25 272641 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $273 million. That figure was $173 million in CRSP’s case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand HudBay Minerals Inc (NYSE:HBM) is the least popular one with only 11 bullish hedge fund positions. CRISPR Therapeutics AG (NASDAQ:CRSP) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on CRSP as the stock returned 31.4% during the same time frame and outperformed the market by an even larger margin.

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