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Did Hedge Funds Drop The Ball On Cutera, Inc. (CUTR) ?

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Cutera, Inc. (NASDAQ:CUTR).

Is Cutera, Inc. (NASDAQ:CUTR) the right pick for your portfolio? Prominent investors are getting less bullish. The number of bullish hedge fund positions dropped by 4 recently. Our calculations also showed that CUTR isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 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.

GAMCO Investors, Mario Gabelli

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the new hedge fund action surrounding Cutera, Inc. (NASDAQ:CUTR).

How are hedge funds trading Cutera, Inc. (NASDAQ:CUTR)?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CUTR over the last 16 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

No of Hedge Funds with CUTR Positions

More specifically, GAMCO Investors was the largest shareholder of Cutera, Inc. (NASDAQ:CUTR), with a stake worth $23.3 million reported as of the end of March. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $13.5 million. Archon Capital Management, Voce Capital, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Cutera, Inc. (NASDAQ:CUTR) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that decided to sell off their full holdings in the second quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group cut the largest position of the 750 funds monitored by Insider Monkey, totaling close to $1.8 million in stock, and Bradley Louis Radoff’s Fondren Management was right behind this move, as the fund cut about $0.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cutera, Inc. (NASDAQ:CUTR) but similarly valued. We will take a look at Landec Corporation (NASDAQ:LNDC), WhiteHorse Finance, Inc. (NASDAQ:WHF), Marlin Business Services Corp. (NASDAQ:MRLN), and Energy Fuels Inc (NYSE:UUUU). This group of stocks’ market valuations match CUTR’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LNDC 11 33094 3
WHF 5 5089 2
MRLN 3 99982 -2
UUUU 9 16295 2
Average 7 38615 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $65 million in CUTR’s case. Landec Corporation (NASDAQ:LNDC) is the most popular stock in this table. On the other hand Marlin Business Services Corp. (NASDAQ:MRLN) is the least popular one with only 3 bullish hedge fund positions. Cutera, Inc. (NASDAQ:CUTR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on CUTR as the stock returned 40.7% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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