Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Compugen Ltd. (NASDAQ:CGEN).
Is CGEN a good stock to buy now? Compugen Ltd. (NASDAQ:CGEN) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 9. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. CGEN shareholders have witnessed an increase in enthusiasm from smart money recently. There were 9 hedge funds in our database with CGEN holdings at the end of June. Our calculations also showed that CGEN 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. With all of this in mind let’s take a glance at the latest hedge fund action regarding Compugen Ltd. (NASDAQ:CGEN).
Do Hedge Funds Think CGEN Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 56% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CGEN over the last 21 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Consonance Capital Management was the largest shareholder of Compugen Ltd. (NASDAQ:CGEN), with a stake worth $42.9 million reported as of the end of September. Trailing Consonance Capital Management was Rock Springs Capital Management, which amassed a stake valued at $18.4 million. PDT Partners, Citadel Investment Group, and DAFNA 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 Consonance Capital Management allocated the biggest weight to Compugen Ltd. (NASDAQ:CGEN), around 5.22% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, dishing out 0.61 percent of its 13F equity portfolio to CGEN.
As one would reasonably expect, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in Compugen Ltd. (NASDAQ:CGEN). Balyasny Asset Management had $1.7 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $1.1 million position during the quarter. The following funds were also among the new CGEN investors: Michael Gelband’s ExodusPoint Capital, Greg Eisner’s Engineers Gate Manager, and D. E. Shaw’s D E Shaw.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Compugen Ltd. (NASDAQ:CGEN) but similarly valued. We will take a look at Terex Corporation (NYSE:TEX), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), HNI Corp (NYSE:HNI), Bloomin’ Brands Inc (NASDAQ:BLMN), Park National Corporation (NYSE:PRK), Gentherm Inc (NASDAQ:THRM), and American Woodmark Corporation (NASDAQ:AMWD). All of these stocks’ market caps resemble CGEN’s market cap.
|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 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $119 million. That figure was $76 million in CGEN’s case. Dicerna Pharmaceuticals Inc (NASDAQ:DRNA) is the most popular stock in this table. On the other hand Park National Corporation (NYSE:PRK) is the least popular one with only 2 bullish hedge fund positions. Compugen Ltd. (NASDAQ:CGEN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CGEN is 60.7. 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 negative signal and 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 surpassed the market again by 16.2 percentage points. Unfortunately CGEN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CGEN investors were disappointed as the stock returned -25.7% 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.