Here is What Hedge Funds Think About Chiasma Inc (CHMA)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Chiasma Inc (NASDAQ:CHMA) went public in July, selling 6.4 million shares at $15 per unit in the IPO. The stock inched up by around 4% since it started trading and only four funds reported long positions in the company as of the end of September. At the end of this article we will also compare CHMA to other stocks, including TETRA Technologies, Inc. (NYSE:TTI), Oi SA (ADR) (NYSE:OIBR.C), and Nautilus, Inc. (NYSE:NLS) to get a better sense of its popularity.

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To most investors, hedge funds are assumed to be worthless, old investment tools of the past. While there are more than 8000 funds in operation at the moment, We hone in on the top tier of this club, around 700 funds. These investment experts shepherd bulk of all hedge funds’ total capital, and by shadowing their top investments, Insider Monkey has found a number of investment strategies that have historically beaten the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s check out the new action regarding Chiasma Inc (NASDAQ:CHMA).

How have hedgies been trading Chiasma Inc (NASDAQ:CHMA)?

When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management has the biggest position in Chiasma Inc (NASDAQ:CHMA), worth close to $11.1 million, amounting to less than 0.1% of its total 13F portfolio. Coming in second is Rock Springs Capital Management, led by Kris Jenner, Gordon Bussard, Graham McPhail, holding a $10.4 million position; 0.8% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism include Ken Greenberg and David Kim’s Ghost Tree Capital, Jim Simons’ Renaissance Technologies.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Chiasma Inc (NASDAQ:CHMA) but similarly valued. These stocks are TETRA Technologies, Inc. (NYSE:TTI), Oi SA (ADR) (NYSE:OIBR.C), Nautilus, Inc. (NYSE:NLS), and China Yuchai International Limited (NYSE:CYD). This group of stocks’ market caps are closest to CHMA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TTI 14 80177 5
OIBR.C 13 33531 0
NLS 27 74730 7
CYD 9 46656 1

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $23 million in CHMA’s case. Nautilus, Inc. (NYSE:NLS) is the most popular stock in this table. On the other hand China Yuchai International Limited (NYSE:CYD) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Chiasma Inc (NASDAQ:CHMA) is even less popular than CYD. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news, because Chiasma is a relatively new stock and has yet to win the confidence of smart money investors.