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Did Hedge Funds Make The Right Call On Catalyst Pharmaceuticals, Inc. (CPRX) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCatalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) ready to rally soon? Investors who are in the know were turning bullish. The number of bullish hedge fund positions advanced by 1 in recent months. Our calculations also showed that CPRX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are numerous formulas shareholders can use to value their stock investments. Two of the most under-the-radar formulas are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the top money managers can trounce the broader indices by a superb margin (see the details here).

Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Keeping this in mind we’re going to take a gander at the key hedge fund action encompassing Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX).

How have hedgies been trading Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX)?

At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CPRX over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Armistice Capital, managed by Steven Boyd, holds the most valuable position in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). Armistice Capital has a $20.8 million position in the stock, comprising 1.3% of its 13F portfolio. The second largest stake is held by Mangrove Partners, led by Nathaniel August, holding a $16.8 million position; 2.3% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions contain Efrem Kamen’s Pura Vida Investments, Cliff Asness’s AQR Capital Management and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Mangrove Partners allocated the biggest weight to Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), around 2.31% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, setting aside 1.42 percent of its 13F equity portfolio to CPRX.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Pura Vida Investments, managed by Efrem Kamen, assembled the most outsized position in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). Pura Vida Investments had $5.6 million invested in the company at the end of the quarter. James A. Silverman’s Opaleye Management also made a $4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Bruce Kovner’s Caxton Associates LP.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) but similarly valued. These stocks are United Insurance Holdings Corp. (NASDAQ:UIHC), The Pennant Group, Inc. (NASDAQ:PNTG), Agilysys, Inc. (NASDAQ:AGYS), and City Office REIT Inc (NYSE:CIO). All of these stocks’ market caps resemble CPRX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UIHC 9 4573 -3
PNTG 8 16893 2
AGYS 14 85802 -2
CIO 15 34627 2
Average 11.5 35474 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $80 million in CPRX’s case. City Office REIT Inc (NYSE:CIO) is the most popular stock in this table. On the other hand The Pennant Group, Inc. (NASDAQ:PNTG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on CPRX, though not to the same extent, as the stock returned 26% since Q1 and outperformed the market as well.

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