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 Corcept Therapeutics Incorporated (NASDAQ:CORT) and determine whether hedge funds had an edge regarding this stock.
Corcept Therapeutics Incorporated (NASDAQ:CORT) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Corcept Therapeutics Incorporated (NASDAQ:CORT) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CORT 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.
In the eyes of most shareholders, hedge funds are perceived as slow, old financial vehicles of years past. While there are over 8000 funds in operation at the moment, Our experts hone in on the bigwigs of this club, about 850 funds. It is estimated that this group of investors administer most of the smart money’s total capital, and by keeping track of their inimitable stock picks, Insider Monkey has determined a few investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 junior gold mining stock. We are also checking out this lithium company which could 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. Now we’re going to analyze the recent hedge fund action encompassing Corcept Therapeutics Incorporated (NASDAQ:CORT).
Hedge fund activity in Corcept Therapeutics Incorporated (NASDAQ:CORT)
At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in CORT a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Corcept Therapeutics Incorporated (NASDAQ:CORT), with a stake worth $150 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $15.7 million. Millennium Management, Winton Capital Management, and GLG Partners 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 Zebra Capital Management allocated the biggest weight to Corcept Therapeutics Incorporated (NASDAQ:CORT), around 0.82% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.54 percent of its 13F equity portfolio to CORT.
As one would reasonably expect, some big names have jumped into Corcept Therapeutics Incorporated (NASDAQ:CORT) headfirst. Navellier & Associates, managed by Louis Navellier, assembled the biggest position in Corcept Therapeutics Incorporated (NASDAQ:CORT). Navellier & Associates had $1.1 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $0.9 million investment in the stock during the quarter. The other funds with brand new CORT positions are Mika Toikka’s AlphaCrest Capital Management, Parvinder Thiara’s Athanor Capital, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Corcept Therapeutics Incorporated (NASDAQ:CORT) but similarly valued. We will take a look at ServisFirst Bancshares, Inc. (NASDAQ:SFBS), LexinFintech Holdings Ltd. (NASDAQ:LX), PROS Holdings, Inc. (NYSE:PRO), AeroVironment, Inc. (NASDAQ:AVAV), Tri Pointe Group Inc (NYSE:TPH), Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX), and Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS). This group of stocks’ market valuations match CORT’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 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $220 million in CORT’s case. Tri Pointe Group Inc (NYSE:TPH) is the most popular stock in this table. On the other hand ServisFirst Bancshares, Inc. (NASDAQ:SFBS) is the least popular one with only 9 bullish hedge fund positions. Corcept Therapeutics Incorporated (NASDAQ:CORT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CORT is 68.8. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately CORT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CORT were disappointed as the stock returned 3.5% in Q3 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.
Disclosure: None. This article was originally published at Insider Monkey.