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Hedge Funds Have Never Been This Bullish On CareDx, Inc. (CDNA)

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about CareDx, Inc. (NASDAQ:CDNA).

CareDx, Inc. (NASDAQ:CDNA) investors should be aware of an increase in hedge fund interest of late. CDNA was in 22 hedge funds’ portfolios at the end of December. There were 19 hedge funds in our database with CDNA holdings at the end of the previous quarter. Our calculations also showed that CDNA isn’t among the 30 most popular stocks among hedge funds.

To most investors, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our experts look at the aristocrats of this group, around 750 funds. These money managers handle the majority of the smart money’s total capital, and by watching their inimitable equity investments, Insider Monkey has revealed a number of investment strategies that have historically outperformed the market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

Richard Driehaus

We’re going to go over the fresh hedge fund action encompassing CareDx, Inc. (NASDAQ:CDNA).

What have hedge funds been doing with CareDx, Inc. (NASDAQ:CDNA)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CDNA over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CDNA_apr2019

The largest stake in CareDx, Inc. (NASDAQ:CDNA) was held by Iszo Capital, which reported holding $32.5 million worth of stock at the end of December. It was followed by Driehaus Capital with a $19 million position. Other investors bullish on the company included Point72 Asset Management, Two Sigma Advisors, and Royce & Associates.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Iszo Capital, managed by Brian Sheehy, initiated the largest position in CareDx, Inc. (NASDAQ:CDNA). Iszo Capital had $32.5 million invested in the company at the end of the quarter. John Osterweis’s Osterweis Capital Management also made a $5.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Joel Greenblatt’s Gotham Asset Management, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CareDx, Inc. (NASDAQ:CDNA) but similarly valued. We will take a look at CNX Midstream Partners LP (NYSE:CNXM), Lindsay Corporation (NYSE:LNN), Carrizo Oil & Gas, Inc. (NASDAQ:CRZO), and ProPetro Holding Corp. (NYSE:PUMP). This group of stocks’ market valuations resemble CDNA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNXM 6 13468 -3
LNN 11 214015 3
CRZO 13 65343 -5
PUMP 20 160260 -1
Average 12.5 113272 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $142 million in CDNA’s case. ProPetro Holding Corp. (NYSE:PUMP) is the most popular stock in this table. On the other hand CNX Midstream Partners LP (NYSE:CNXM) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks CareDx, Inc. (NASDAQ:CDNA) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CDNA wasn’t nearly as popular as these 15 stock and hedge funds that were betting on CDNA were disappointed as the stock returned 2.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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