Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards COMPASS Pathways Plc (NASDAQ:CMPS) to find out whether there were any major changes in hedge funds’ views.
Is CMPS a good stock to buy now? Prominent investors were becoming more confident. The number of bullish hedge fund bets moved up by 17 lately. COMPASS Pathways Plc (NASDAQ:CMPS) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that CMPS 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.
In the eyes of most stock holders, hedge funds are assumed to be underperforming, outdated investment vehicles of yesteryear. While there are more than 8000 funds in operation at present, We hone in on the bigwigs of this group, around 850 funds. These hedge fund managers manage most of the hedge fund industry’s total asset base, and by tailing their inimitable investments, Insider Monkey has figured out several investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
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 let’s check out the new hedge fund action encompassing COMPASS Pathways Plc (NASDAQ:CMPS).
Do Hedge Funds Think CMPS Is A Good Stock To Buy Now?
At third quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17 from the previous quarter. The graph below displays the number of hedge funds with bullish position in CMPS over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Joseph Edelman’s Perceptive Advisors has the biggest position in COMPASS Pathways Plc (NASDAQ:CMPS), worth close to $36.6 million, amounting to 0.5% of its total 13F portfolio. On Perceptive Advisors’s heels is Logos Capital, led by Arsani William, holding a $17.5 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Manfred Yu’s Acuta Capital Partners, Farallon Capital and OrbiMed Advisors. In terms of the portfolio weights assigned to each position Acuta Capital Partners allocated the biggest weight to COMPASS Pathways Plc (NASDAQ:CMPS), around 3.7% of its 13F portfolio. Soleus Capital is also relatively very bullish on the stock, dishing out 2.9 percent of its 13F equity portfolio to CMPS.
As industrywide interest jumped, key money managers have been driving this bullishness. Perceptive Advisors, managed by Joseph Edelman, created the most outsized position in COMPASS Pathways Plc (NASDAQ:CMPS). Perceptive Advisors had $36.6 million invested in the company at the end of the quarter. Arsani William’s Logos Capital also initiated a $17.5 million position during the quarter. The other funds with brand new CMPS positions are Manfred Yu’s Acuta Capital Partners, Farallon Capital, and OrbiMed Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as COMPASS Pathways Plc (NASDAQ:CMPS) but similarly valued. We will take a look at MFA Financial, Inc. (NYSE:MFA), The St. Joe Company (NYSE:JOE), Epizyme Inc (NASDAQ:EPZM), TechTarget Inc (NASDAQ:TTGT), Encore Capital Group, Inc. (NASDAQ:ECPG), BrightView Holdings, Inc. (NYSE:BV), and Argo Group International Holdings, Ltd. (NYSE:ARGO). All of these stocks’ market caps are similar to CMPS’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 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $139 million in CMPS’s case. Epizyme Inc (NASDAQ:EPZM) is the most popular stock in this table. On the other hand TechTarget Inc (NASDAQ:TTGT) is the least popular one with only 14 bullish hedge fund positions. COMPASS Pathways Plc (NASDAQ:CMPS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CMPS is 40. 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. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on CMPS as the stock returned 58.1% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.