Is CFRX A Good Stock To Buy Now?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about ContraFect Corp (NASDAQ:CFRX) in this article.

Is CFRX a good stock to buy now? Money managers were getting more optimistic. The number of bullish hedge fund bets rose by 1 in recent months. ContraFect Corp (NASDAQ:CFRX) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. Our calculations also showed that CFRX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 10 hedge funds in our database with CFRX holdings at the end of June.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Louis Bacon of Moore Global Investments

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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we’re going to review the new hedge fund action encompassing ContraFect Corp (NASDAQ:CFRX).

Do Hedge Funds Think CFRX Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CFRX over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Biotechnology Value Fund / BVF Inc was the largest shareholder of ContraFect Corp (NASDAQ:CFRX), with a stake worth $8.4 million reported as of the end of September. Trailing Biotechnology Value Fund / BVF Inc was Adage Capital Management, which amassed a stake valued at $3.4 million. 683 Capital Partners, Moore Global Investments, and Portolan Capital Management 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 Birchview Capital allocated the biggest weight to ContraFect Corp (NASDAQ:CFRX), around 0.9% of its 13F portfolio. Biotechnology Value Fund / BVF Inc is also relatively very bullish on the stock, earmarking 0.46 percent of its 13F equity portfolio to CFRX.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Opaleye Management, managed by James A. Silverman, assembled the most valuable position in ContraFect Corp (NASDAQ:CFRX). Opaleye Management had $1.2 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also made a $0.3 million investment in the stock during the quarter.

Let’s go over hedge fund activity in other stocks similar to ContraFect Corp (NASDAQ:CFRX). We will take a look at BiomX Inc. (NYSE:PHGE), GlycoMimetics, Inc. (NASDAQ:GLYC), NewHold Investment Corp. (NASDAQ:NHIC), Natural Resource Partners LP (NYSE:NRP), CIM Commercial Trust Corporation (NASDAQ:CMCT), Coastal Financial Corporation (NASDAQ:CCB), and Tuniu Corporation (NASDAQ:TOUR). This group of stocks’ market valuations match CFRX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PHGE 6 17882 -1
GLYC 12 45240 -2
NHIC 11 43710 11
NRP 2 6814 0
CMCT 4 11308 0
CCB 2 12266 0
TOUR 2 9175 0
Average 5.6 20914 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $22 million in CFRX’s case. GlycoMimetics, Inc. (NASDAQ:GLYC) is the most popular stock in this table. On the other hand Natural Resource Partners LP (NYSE:NRP) is the least popular one with only 2 bullish hedge fund positions. ContraFect Corp (NASDAQ:CFRX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CFRX is 76.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately CFRX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CFRX were disappointed as the stock returned 3.4% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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