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 900 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 Cogent Biosciences, Inc. (NASDAQ:COGT).
Is COGT a good stock to buy? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund bets were trimmed by 1 recently. Cogent Biosciences, Inc. (NASDAQ:COGT) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 28. Our calculations also showed that COGT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 28 hedge funds in our database with COGT positions at the end of the fourth quarter.
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 115 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a glance at the latest hedge fund action regarding Cogent Biosciences, Inc. (NASDAQ:COGT).
Do Hedge Funds Think COGT Is A Good Stock To Buy Now?
At first quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in COGT over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cogent Biosciences, Inc. (NASDAQ:COGT) was held by Perceptive Advisors, which reported holding $28 million worth of stock at the end of December. It was followed by Ghost Tree Capital with a $14 million position. Other investors bullish on the company included Biotechnology Value Fund / BVF Inc, Logos Capital, and Commodore Capital. In terms of the portfolio weights assigned to each position Commodore Capital allocated the biggest weight to Cogent Biosciences, Inc. (NASDAQ:COGT), around 4.39% of its 13F portfolio. Ghost Tree Capital is also relatively very bullish on the stock, designating 3.3 percent of its 13F equity portfolio to COGT.
Because Cogent Biosciences, Inc. (NASDAQ:COGT) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedgies who sold off their entire stakes last quarter. Interestingly, OrbiMed Advisors sold off the biggest stake of all the hedgies followed by Insider Monkey, valued at close to $7.4 million in stock. Mitchell Blutt’s fund, Consonance Capital Management, also sold off its stock, about $6.9 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cogent Biosciences, Inc. (NASDAQ:COGT) but similarly valued. We will take a look at Protective Insurance Corporation (NASDAQ:PTVCA), Olympic Steel, Inc. (NASDAQ:ZEUS), NextDecade Corporation (NASDAQ:NEXT), Surface Oncology, Inc. (NASDAQ:SURF), Frequency Therapeutics, Inc. (NASDAQ:FREQ), Teekay Corporation (NYSE:TK), and StarTek, Inc. (NYSE:SRT). All of these stocks’ market caps are closest to COGT’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 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $170 million in COGT’s case. Surface Oncology, Inc. (NASDAQ:SURF) is the most popular stock in this table. On the other hand Protective Insurance Corporation (NASDAQ:PTVCA) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Cogent Biosciences, Inc. (NASDAQ:COGT) is more popular among hedge funds. Our overall hedge fund sentiment score for COGT is 82.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Unfortunately COGT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on COGT were disappointed as the stock returned -21.5% since the end of the first quarter (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.