Hedge Funds Are Selling Coherus Biosciences Inc (CHRS)

The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Coherus Biosciences Inc (NASDAQ:CHRS) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Coherus Biosciences Inc (NASDAQ:CHRS) the right investment to pursue these days? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund positions shrunk by 9 in recent months. Coherus Biosciences Inc (NASDAQ:CHRS) was in 26 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 35. Our calculations also showed that CHRS 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). There were 35 hedge funds in our database with CHRS positions at the end of the first quarter.

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 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 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 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.

Michael Castor Sio Capital

Michael Castor of Sio Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. With all of this in mind we’re going to take a gander at the fresh hedge fund action surrounding Coherus Biosciences Inc (NASDAQ:CHRS).

How have hedgies been trading Coherus Biosciences Inc (NASDAQ:CHRS)?

Heading into the third quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHRS over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Among these funds, Camber Capital Management held the most valuable stake in Coherus Biosciences Inc (NASDAQ:CHRS), which was worth $39.3 million at the end of the third quarter. On the second spot was Rock Springs Capital Management which amassed $36.2 million worth of shares. Sio Capital, D E Shaw, and Impax Asset Management 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 Sio Capital allocated the biggest weight to Coherus Biosciences Inc (NASDAQ:CHRS), around 5.92% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, dishing out 2.25 percent of its 13F equity portfolio to CHRS.

Because Coherus Biosciences Inc (NASDAQ:CHRS) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedgies that elected to cut their full holdings by the end of the second quarter. Intriguingly, Mitchell Blutt’s Consonance Capital Management sold off the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $32.8 million in stock, and David Rosen’s Rubric Capital Management was right behind this move, as the fund dumped about $25.7 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 9 funds by the end of the second quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Coherus Biosciences Inc (NASDAQ:CHRS) but similarly valued. These stocks are Covanta Holding Corporation (NYSE:CVA), Sangamo Therapeutics, Inc. (NASDAQ:SGMO), Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), TTM Technologies, Inc. (NASDAQ:TTMI), Matson Inc. (NYSE:MATX), and Office Properties Income Trust (NASDAQ:OPI). This group of stocks’ market valuations are similar to CHRS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVA 21 76242 -4
SGMO 22 88068 1
CNST 35 452665 10
TRHC 8 34469 1
TTMI 18 85469 8
MATX 9 14403 6
OPI 11 20932 1
Average 17.7 110321 3.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.7 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $193 million in CHRS’s case. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 8 bullish hedge fund positions. Coherus Biosciences Inc (NASDAQ:CHRS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CHRS is 51.6. 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 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately CHRS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CHRS were disappointed as the stock returned 3.1% during the same time period 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 many of these stocks already outperformed the market so far this year.

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