Is CTSO A Good Stock To Buy Now?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Cytosorbents Corp (NASDAQ:CTSO) changed recently.

Is CTSO a good stock to buy now? Cytosorbents Corp (NASDAQ:CTSO) shareholders have witnessed an increase in hedge fund interest recently. Cytosorbents Corp (NASDAQ:CTSO) was in 13 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. There were 9 hedge funds in our database with CTSO positions at the end of the second quarter. Our calculations also showed that CTSO 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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 take a peek at the key hedge fund action encompassing Cytosorbents Corp (NASDAQ:CTSO).

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

At the end of September, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 44% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CTSO over the last 21 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Redmile Group was the largest shareholder of Cytosorbents Corp (NASDAQ:CTSO), with a stake worth $16.8 million reported as of the end of September. Trailing Redmile Group was Sectoral Asset Management, which amassed a stake valued at $13 million. Skylands Capital, Two Sigma Advisors, and Royce & Associates 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 Skylands Capital allocated the biggest weight to Cytosorbents Corp (NASDAQ:CTSO), around 1.89% of its 13F portfolio. Sectoral Asset Management is also relatively very bullish on the stock, dishing out 1.12 percent of its 13F equity portfolio to CTSO.

As industrywide interest jumped, some big names have jumped into Cytosorbents Corp (NASDAQ:CTSO) headfirst. Redmile Group, managed by Jeremy Green, established the largest position in Cytosorbents Corp (NASDAQ:CTSO). Redmile Group had $16.8 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also initiated a $13 million position during the quarter. The following funds were also among the new CTSO investors: Israel Englander’s Millennium Management, Cliff Asness’s AQR Capital Management, and Renaissance Technologies.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cytosorbents Corp (NASDAQ:CTSO) but similarly valued. We will take a look at Bridge Bancorp, Inc. (NASDAQ:BDGE), Crawford & Company (NYSE:CRD), Vishay Precision Group Inc (NYSE:VPG), Wanda Sports Group Company Limited (NASDAQ:WSG), DURECT Corporation (NASDAQ:DRRX), AGM Group Holdings Inc. (NASDAQ:AGMH), and RISE Education Cayman Ltd (NASDAQ:REDU). All of these stocks’ market caps are similar to CTSO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BDGE 12 54568 3
CRD 9 42031 1
VPG 15 91702 -2
WSG 6 3013 0
DRRX 8 43703 3
AGMH 1 186 0
REDU 2 1101 -1
Average 7.6 33758 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.6 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $49 million in CTSO’s case. Vishay Precision Group Inc (NYSE:VPG) is the most popular stock in this table. On the other hand AGM Group Holdings Inc. (NASDAQ:AGMH) is the least popular one with only 1 bullish hedge fund positions. Cytosorbents Corp (NASDAQ:CTSO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CTSO is 81.9. 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. 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 CTSO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CTSO were disappointed as the stock returned 3.1% 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.