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

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 CRISPR Therapeutics AG (NASDAQ:CRSP).

CRISPR Therapeutics AG (NASDAQ:CRSP) was in 16 hedge funds’ portfolios at the end of September. CRSP investors should be aware of an increase in enthusiasm from smart money recently. There were 13 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 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.

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 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 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 stocks that are in our short portfolio.

FARALLON CAPITAL

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. We’re going to take a glance at the fresh hedge fund action surrounding CRISPR Therapeutics AG (NASDAQ:CRSP).

What have hedge funds been doing with CRISPR Therapeutics AG (NASDAQ:CRSP)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in CRSP a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CRSP A Good Stock To Buy?

More specifically, Cormorant Asset Management was the largest shareholder of CRISPR Therapeutics AG (NASDAQ:CRSP), with a stake worth $44.4 million reported as of the end of September. Trailing Cormorant Asset Management was Farallon Capital, which amassed a stake valued at $23 million. OrbiMed Advisors, Clough Capital Partners, and Valiant Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to CRISPR Therapeutics AG (NASDAQ:CRSP), around 2.71% of its 13F portfolio. Clough Capital Partners is also relatively very bullish on the stock, dishing out 1.63 percent of its 13F equity portfolio to CRSP.

Now, key hedge funds were leading the bulls’ herd. OrbiMed Advisors, managed by Samuel Isaly, assembled the largest position in CRISPR Therapeutics AG (NASDAQ:CRSP). OrbiMed Advisors had $21.2 million invested in the company at the end of the quarter. Steven Boyd’s Armistice Capital also made a $10.8 million investment in the stock during the quarter. The other funds with new positions in the stock are William Harnisch’s Peconic Partners, Israel Englander’s Millennium Management, and Sculptor Capital.

Let’s check out hedge fund activity in other stocks similar to CRISPR Therapeutics AG (NASDAQ:CRSP). We will take a look at Fastly, Inc. (NYSE:FSLY), The Hain Celestial Group, Inc. (NASDAQ:HAIN), TeleTech Holdings, Inc. (NASDAQ:TTEC), and Chart Industries, Inc. (NASDAQ:GTLS). This group of stocks’ market caps match CRSP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSLY 16 126686 3
HAIN 19 545805 2
TTEC 14 41238 -3
GTLS 19 261236 -5
Average 17 243741 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $150 million in CRSP’s case. The Hain Celestial Group, Inc. (NASDAQ:HAIN) is the most popular stock in this table. On the other hand TeleTech Holdings, Inc. (NASDAQ:TTEC) is the least popular one with only 14 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 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 CRSP as the stock returned 74.8% 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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