With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was CRH Medical Corporation (NYSE:CRHM).
Hedge fund interest in CRH Medical Corporation (NYSE:CRHM) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CRHM to other stocks including Babcock & Wilcox Enterprises Inc (NYSE:BW), Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), and Brasilagro Cia Brasileira De Propriedades Agricolas (NYSE:LND) to get a better sense of its popularity.
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to go over the new hedge fund action regarding CRH Medical Corporation (NYSE:CRHM).
How have hedgies been trading CRH Medical Corporation (NYSE:CRHM)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRHM over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Nantahala Capital Management was the largest shareholder of CRH Medical Corporation (NYSE:CRHM), with a stake worth $20.1 million reported as of the end of September. Trailing Nantahala Capital Management was Stadium Capital Management, which amassed a stake valued at $15.4 million. Renaissance Technologies, Royce & Associates, and D E Shaw 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 Stadium Capital Management allocated the biggest weight to CRH Medical Corporation (NYSE:CRHM), around 9.24% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, designating 0.74 percent of its 13F equity portfolio to CRHM.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s now review hedge fund activity in other stocks similar to CRH Medical Corporation (NYSE:CRHM). These stocks are Babcock & Wilcox Enterprises Inc (NYSE:BW), Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE), Brasilagro Cia Brasileira De Propriedades Agricolas (NYSE:LND), and Hamilton Beach Brands Holding Company (NYSE:HBB). This group of stocks’ market values are closest to CRHM’s market value.
|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 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $32 million. That figure was $40 million in CRHM’s case. Aeglea BioTherapeutics, Inc. (NASDAQ:AGLE) is the most popular stock in this table. On the other hand Brasilagro Cia Brasileira De Propriedades Agricolas (NYSE:LND) is the least popular one with only 1 bullish hedge fund positions. CRH Medical Corporation (NYSE:CRHM) is not the least popular stock in this group but hedge fund interest is still below average. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CRHM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRHM investors were disappointed as the stock returned 0.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.