Do Hedge Funds Love Intra-Cellular Therapies Inc (ITCI)?

In this article you are going to find out whether hedge funds think Intra-Cellular Therapies Inc (NASDAQ:ITCI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Intra-Cellular Therapies Inc (NASDAQ:ITCI) a bargain? The best stock pickers are becoming hopeful. The number of bullish hedge fund positions rose by 7 in recent months. 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). ITCI was in 19 hedge funds’ portfolios at the end of March. There were 12 hedge funds in our database with ITCI holdings at the end of the previous quarter.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet 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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the fresh hedge fund action surrounding Intra-Cellular Therapies Inc (NASDAQ:ITCI).

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

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 58% from the fourth quarter of 2019. On the other hand, there were a total of 12 hedge funds with a bullish position in ITCI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (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, some big names were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most outsized 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 go over hedge fund activity in other stocks similar to Intra-Cellular Therapies Inc (NASDAQ:ITCI). 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 valuations resemble ITCI’s market valuation.

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 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on ITCI as the stock returned 66.9% so far in Q2 (through June 22nd) 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.