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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) and determine whether the smart money was really smart about this stock.
Is Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) a marvelous investment now? Money managers were becoming hopeful. The number of long hedge fund bets rose by 2 lately. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) was in 22 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CPRX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX).
What have hedge funds been doing with Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX)?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CPRX over the last 20 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Armistice Capital was the largest shareholder of Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), with a stake worth $28.6 million reported as of the end of September. Trailing Armistice Capital was Mangrove Partners, which amassed a stake valued at $14.5 million. Royce & Associates, Opaleye Management, and Two Sigma Advisors 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 Mangrove Partners allocated the biggest weight to Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), around 3.53% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, designating 1.69 percent of its 13F equity portfolio to CPRX.
As aggregate interest increased, key money managers have been driving this bullishness. Newtyn Management, managed by Noah Levy and Eugene Dozortsev, initiated the most outsized position in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). Newtyn Management had $4.6 million invested in the company at the end of the quarter. Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund also initiated a $3.4 million position during the quarter. The following funds were also among the new CPRX investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Michael Gelband’s ExodusPoint Capital.
Let’s go over hedge fund activity in other stocks similar to Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). These stocks are IMARA Inc. (NASDAQ:IMRA), Paysign, Inc. (NASDAQ:PAYS), FuelCell Energy, Inc. (NASDAQ:FCEL), Ready Capital Corporation (NYSE:RC), SP Plus Corp (NASDAQ:SP), Interface, Inc. (NASDAQ:TILE), and Urstadt Biddle Properties Inc (NYSE:UBA). This group of stocks’ market values match CPRX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $92 million in CPRX’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table. On the other hand Paysign, Inc. (NASDAQ:PAYS) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) is more popular among hedge funds. Our overall hedge fund sentiment score for CPRX is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately CPRX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CPRX were disappointed as the stock returned -35.7% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.