Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Celldex Therapeutics, Inc. (NASDAQ:CLDX).
The stock of the biopharmaceutical company Celldex Therapeutics, Inc. (NASDAQ:CLDX) lost 42% in the first nine months of 2015 and during the third quarter it saw a decrease in hedge fund sentiment. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost or drop in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Diodes Incorporated (NASDAQ:DIOD), TherapeuticsMD Inc (NYSEMKT:TXMD), and MBIA Inc. (NYSE:MBI) to gather more data points.
In the financial world, there are tons of gauges investors employ to value stocks. A couple of the most underrated gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat the broader indices by a healthy amount (see the details here).
With all of this in mind, we’re going to check out the fresh action encompassing Celldex Therapeutics, Inc. (NASDAQ:CLDX).
What does the smart money think about Celldex Therapeutics, Inc. (NASDAQ:CLDX)?
Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 26% over the quarter. Among these funds, Jeremy Green’s Redmile Group has the biggest position in Celldex Therapeutics, Inc. (NASDAQ:CLDX), worth close to $20.6 million, corresponding to 0.5% of its total 13F portfolio. On Redmile Group’s heels is Millennium Management, led by Israel Englander, holding an $8.1 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions contain Clifford Fox’s Columbus Circle Investors and Anthony Giammalva’s Sound Energy Partners.
Because Celldex Therapeutics, Inc. (NASDAQ:CLDX) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few money managers who were dropping their positions entirely in the third quarter. At the top of the heap, Mitchell Blutt’s Consonance Capital Management dropped the largest stake of the 700 funds followed by Insider Monkey, totaling about $19 million in stock, and Behzad Aghazadeh’s venBio Select Advisor was right behind this move, as the fund cut about $8.9 million worth of shares.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Celldex Therapeutics, Inc. (NASDAQ:CLDX) but similarly valued. We will take a look at Diodes Incorporated (NASDAQ:DIOD), TherapeuticsMD Inc (NYSEMKT:TXMD), MBIA Inc. (NYSE:MBI), and Outerwall Inc (NASDAQ:OUTR). This group of stocks’ market caps match CLDX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was just $52 million in CLDX’s case. MBIA Inc. (NYSE:MBI) is the most popular stock in this table. On the other hand Diodes Incorporated (NASDAQ:DIOD) and TherapeuticsMD Inc (NYSEMKT:TXMD) are the least popular ones with only 13 bullish hedge fund positions. Celldex Therapeutics, Inc. (NASDAQ:CLDX) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MBI might be a better candidate to consider a long position.