Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
CF Corp (NASDAQ:CFCO) was in 23 hedge funds’ portfolios at the end of September. CFCO has experienced an increase in hedge fund sentiment in recent months. There were 21 hedge funds in our database with CFCO positions at the end of the previous quarter. At the end of this article we will also compare CFCO to other stocks including Retrophin Inc (NASDAQ:RTRX), Pacific Biosciences of California (NASDAQ:PACB), and Merrimack Pharmaceuticals Inc (NASDAQ:MACK) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How have hedgies been trading CF Corp (NASDAQ:CFCO)?
Heading into the fourth quarter of 2016, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, up by 10% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards CFCO over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital has the biggest position in CF Corp (NASDAQ:CFCO), worth close to $71.4 million, comprising 1.6% of its total 13F portfolio. The second most bullish fund manager is Angelo Gordon & Co, led by John M. Angelo and Michael L. Gordon, holding a $56.8 million position; 4.3% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism include Sander Gerber’s Hudson Bay Capital Management, Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors. We should note that Hudson Bay Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names were breaking ground themselves. Angelo Gordon & Co, assembled the largest position in CF Corp (NASDAQ:CFCO). Sander Gerber’s Hudson Bay Capital Management also initiated a $41.6 million position during the quarter. The other funds with new positions in the stock are Joshua Friedman and Mitchell Julis’ Canyon Capital Advisors, and Neil Chriss’ Hutchin Hill Capital.
Let’s go over hedge fund activity in other stocks similar to CF Corp (NASDAQ:CFCO). We will take a look at Retrophin Inc (NASDAQ:RTRX), Pacific Biosciences of California (NASDAQ:PACB), Merrimack Pharmaceuticals Inc (NASDAQ:MACK), and iKang Healthcare Group Inc (ADR) (NASDAQ:KANG). All of these stocks’ market caps match CFCO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RTRX | 23 | 400233 | 5 |
| PACB | 17 | 197194 | -5 |
| MACK | 12 | 82494 | 1 |
| KANG | 12 | 63122 | 2 |
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 $186 million. That figure was $414 million in CFCO’s case. Retrophin Inc (NASDAQ:RTRX) is the most popular stock in this table. On the other hand Merrimack Pharmaceuticals Inc (NASDAQ:MACK) is the least popular one with only 12 bullish hedge fund positions. CF Corp (NASDAQ:CFCO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RTRX might be a better candidate to consider taking a long position in.
Disclosure: None