In this article you are going to find out whether hedge funds think Cutera, Inc. (NASDAQ:CUTR) 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 Cutera, Inc. (NASDAQ:CUTR) a healthy stock for your portfolio? Hedge funds were turning bullish. The number of bullish hedge fund bets went up by 6 lately. Cutera, Inc. (NASDAQ:CUTR) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CUTR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 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 S&P 500 ETFs by 79 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 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.
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Do Hedge Funds Think CUTR Is A Good Stock To Buy Now?
At the end of June, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CUTR over the last 24 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Mario Gabelli’s GAMCO Investors has the most valuable position in Cutera, Inc. (NASDAQ:CUTR), worth close to $61 million, accounting for 0.5% of its total 13F portfolio. The second most bullish fund manager is J. Daniel Plants of Voce Capital, with a $59.3 million position; 21.3% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism comprise Chuck Royce’s Royce & Associates, Efrem Kamen’s Pura Vida Investments and Renaissance Technologies. In terms of the portfolio weights assigned to each position Voce Capital allocated the biggest weight to Cutera, Inc. (NASDAQ:CUTR), around 21.29% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, designating 1.49 percent of its 13F equity portfolio to CUTR.
Now, key hedge funds have been driving this bullishness. Pura Vida Investments, managed by Efrem Kamen, assembled the most outsized call position in Cutera, Inc. (NASDAQ:CUTR). Pura Vida Investments had $14.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $4.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Josh Goldberg’s G2 Investment Partners Management, Peter Muller’s PDT Partners, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cutera, Inc. (NASDAQ:CUTR) but similarly valued. These stocks are Turning Point Brands, Inc. (NYSE:TPB), PyroGenesis Canada Inc. (NASDAQ:PYR), Arch Resources, Inc. (NYSE:ARCH), The Geo Group, Inc. (NYSE:GEO), A10 Networks Inc (NYSE:ATEN), HomeStreet Inc (NASDAQ:HMST), and HEXO Corp. (NYSE:HEXO). This group of stocks’ market valuations resemble CUTR’s market valuation.
|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 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $278 million in CUTR’s case. Turning Point Brands, Inc. (NYSE:TPB) is the most popular stock in this table. On the other hand PyroGenesis Canada Inc. (NASDAQ:PYR) is the least popular one with only 1 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 overall hedge fund sentiment score for CUTR is 76.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately CUTR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CUTR were disappointed as the stock returned -15% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.