Did Hedge Funds Make The Right Call On Intra-Cellular Therapies Inc (ITCI)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. 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 we look at how hedge funds traded Intra-Cellular Therapies Inc (NASDAQ:ITCI) and determine whether the smart money was really smart about this stock.

Is Intra-Cellular Therapies Inc (NASDAQ:ITCI) an exceptional investment today? Prominent investors were taking a bullish view. The number of bullish hedge fund bets improved by 7 lately. Our calculations also showed that ITCI 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to analyze the latest hedge fund action surrounding Intra-Cellular Therapies Inc (NASDAQ:ITCI).

What does smart money think about Intra-Cellular Therapies Inc (NASDAQ:ITCI)?

Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 58% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ITCI over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is ITCI A Good Stock To Buy?

More specifically, Consonance Capital Management was the largest shareholder of Intra-Cellular Therapies Inc (NASDAQ:ITCI), with a stake worth $25.4 million reported as of the end of September. Trailing Consonance Capital Management was Samlyn Capital, which amassed a stake valued at $17.7 million. Marshall Wace LLP, Rhenman & Partners Asset Management, and Alyeska Investment Group 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 Consonance Capital Management allocated the biggest weight to Intra-Cellular Therapies Inc (NASDAQ:ITCI), around 1.89% of its 13F portfolio. Rhenman & Partners Asset Management is also relatively very bullish on the stock, earmarking 1.22 percent of its 13F equity portfolio to ITCI.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in Intra-Cellular Therapies Inc (NASDAQ:ITCI). Marshall Wace LLP had $10.5 million invested in the company at the end of the quarter. Henrik Rhenman’s Rhenman & Partners Asset Management also made a $8.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Neil Shahrestani’s Ikarian Capital, and  Renaissance Technologies.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Intra-Cellular Therapies Inc (NASDAQ:ITCI) but similarly valued. We will take a look at Hope Bancorp, Inc. (NASDAQ:HOPE), SFL Corporation Ltd. (NYSE:SFL), Comstock Resources Inc (NYSE:CRK), and TriMas Corp (NASDAQ:TRS). This group of stocks’ market values are similar to ITCI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HOPE 18 42707 -1
SFL 14 43537 0
CRK 3 2762 -4
TRS 13 71796 -2
Average 12 40201 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $99 million in ITCI’s case. Hope Bancorp, Inc. (NASDAQ:HOPE) is the most popular stock in this table. On the other hand Comstock Resources Inc (NYSE:CRK) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Intra-Cellular Therapies Inc (NASDAQ:ITCI) 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 returned 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 ITCI as the stock returned 40% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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