How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding CHP Merger Corp. (NASDAQ:CHPMU).
CHP Merger Corp. (NASDAQ:CHPMU) shareholders have witnessed a decrease in enthusiasm from smart money lately. CHP Merger Corp. (NASDAQ:CHPMU) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 15. There were 4 hedge funds in our database with CHPMU positions at the end of the fourth quarter. Our calculations also showed that CHPMU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
At the moment there are tons of methods stock traders have at their disposal to size up stocks. A couple of the most useful methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce the market by a significant amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Michael Platt of BlueCrest Capital Mgmt.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a glance at the key hedge fund action surrounding CHP Merger Corp. (NASDAQ:CHPMU).
Do Hedge Funds Think CHPMU Is A Good Stock To Buy Now?
At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CHPMU over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital has the largest position in CHP Merger Corp. (NASDAQ:CHPMU), worth close to $22.9 million, corresponding to 0.2% of its total 13F portfolio. The second most bullish fund manager is BlueCrest Capital Mgmt., led by Michael Platt and William Reeves, holding a $12.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Magnetar Capital allocated the biggest weight to CHP Merger Corp. (NASDAQ:CHPMU), around 0.22% of its 13F portfolio. BlueCrest Capital Mgmt. is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to CHPMU.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Deepcurrents Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CHPMU as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CHP Merger Corp. (NASDAQ:CHPMU) but similarly valued. We will take a look at Ellomay Capital Ltd. (NYSE:ELLO), Falcon Minerals Corporation (NASDAQ:FLMN), NewAge Inc (NASDAQ:NBEV), Athersys, Inc. (NASDAQ:ATHX), Spruce Biosciences, Inc. (NASDAQ:SPRB), MEI Pharma Inc (NASDAQ:MEIP), and Old Second Bancorp Inc. (NASDAQ:OSBC). This group of stocks’ market valuations are closest to CHPMU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ELLO | 1 | 522 | 0 |
| FLMN | 21 | 42705 | -5 |
| NBEV | 7 | 18274 | 2 |
| ATHX | 7 | 1251 | 2 |
| SPRB | 8 | 84132 | -3 |
| MEIP | 17 | 61724 | 1 |
| OSBC | 7 | 15330 | -2 |
| Average | 9.7 | 31991 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $42 million in CHPMU’s case. Falcon Minerals Corporation (NASDAQ:FLMN) is the most popular stock in this table. On the other hand Ellomay Capital Ltd. (NYSE:ELLO) is the least popular one with only 1 bullish hedge fund positions. CHP Merger Corp. (NASDAQ:CHPMU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHPMU is 15. 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 negative signal and 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately CHPMU wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CHPMU investors were disappointed as the stock returned -0.8% since the end of March (through 6/11) 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 most of these stocks already outperformed the market in 2021.
Follow Chp Merger Corp. (NASDAQ:CHPM)
Follow Chp Merger Corp. (NASDAQ:CHPM)
Disclosure: None. This article was originally published at Insider Monkey.