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

The government requires hedge funds and wealthy investors that crossed the $100 million equity holdings threshold are required to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31. We at Insider Monkey have made an extensive database of nearly 750 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded CRISPR Therapeutics AG (NASDAQ:CRSP) based on those filings.

Is CRISPR Therapeutics AG (NASDAQ:CRSP) a bargain? Investors who are in the know are becoming less hopeful. The number of bullish hedge fund bets were trimmed by 5 recently. Our calculations also showed that CRSP isn’t among the 30 most popular stocks among hedge funds. CRSP was in 11 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with CRSP holdings at the end of the previous quarter.

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 market by 32 percentage points since May 2014 through March 12, 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.

Oleg Nodelman EcoR1 Capital

We’re going to take a look at the new hedge fund action regarding CRISPR Therapeutics AG (NASDAQ:CRSP).

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

Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CRSP over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CRSP_apr2019

The largest stake in CRISPR Therapeutics AG (NASDAQ:CRSP) was held by Farallon Capital, which reported holding $35.7 million worth of stock at the end of December. It was followed by Clough Capital Partners with a $14.7 million position. Other investors bullish on the company included Two Sigma Advisors, Valiant Capital, and EcoR1 Capital.

Judging by the fact that CRISPR Therapeutics AG (NASDAQ:CRSP) has experienced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of money managers that decided to sell off their positions entirely heading into Q3. Interestingly, Samuel Isaly’s OrbiMed Advisors cut the largest investment of the “upper crust” of funds watched by Insider Monkey, worth about $22 million in stock, and Eli Casdin’s Casdin Capital was right behind this move, as the fund cut about $9.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q3.

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. These stocks are WestAmerica Bancorp. (NASDAQ:WABC), Aimmune Therapeutics Inc (NASDAQ:AIMT), Callon Petroleum Company (NYSE:CPE), and Spark Therapeutics Inc (NASDAQ:ONCE). This group of stocks’ market values are similar to CRSP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WABC 5 4479 1
AIMT 16 188597 -2
CPE 22 175464 -4
ONCE 15 329072 -6
Average 14.5 174403 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $89 million in CRSP’s case. Callon Petroleum Company (NYSE:CPE) is the most popular stock in this table. On the other hand WestAmerica Bancorp. (NASDAQ:WABC) is the least popular one with only 5 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on CRSP as the stock returned 30.4% and outperformed the market by an even larger margin.

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

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