The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Cerulean Pharma Inc (NASDAQ:CERU) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Cerulean Pharma Inc (NASDAQ:CERU) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as The Eastern Company (NASDAQ:EML), Connecture Inc (NASDAQ:CNXR), and Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP) to gather more data points.
In the eyes of most shareholders, hedge funds are viewed as underperforming, outdated investment vehicles of years past. While there are over 8000 funds in operation at present, Our researchers hone in on the upper echelon of this club, about 700 funds. These money managers shepherd most of the hedge fund industry’s total asset base, and by tracking their unrivaled stock picks, Insider Monkey has formulated numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, let’s take a gander at the recent action encompassing Cerulean Pharma Inc (NASDAQ:CERU).
What does the smart money think about Cerulean Pharma Inc (NASDAQ:CERU)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, holds the most valuable position in Cerulean Pharma Inc (NASDAQ:CERU). Rock Springs Capital Management has a $2.3 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Bihua Chen’s Cormorant Asset Management, with a $2 million position; the fund has 0.3% of its 13F portfolio invested in the stock. The remaining professional money managers that hold long positions contain Anand Parekh’s Alyeska Investment Group, Israel Englander’s Millennium Management and Glenn Russell Dubin’s Highbridge Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Clough Capital Partners. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified CERU as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cerulean Pharma Inc (NASDAQ:CERU) but similarly valued. These stocks are The Eastern Company (NASDAQ:EML), Connecture Inc (NASDAQ:CNXR), Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP), and MRV Communications, Inc. (NASDAQ:MRVC). This group of stocks’ market values resemble CERU’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $27 million, higher than the $6 million in CERU’s case. Tonix Pharmaceuticals Holding Corp. (NASDAQ:TNXP) is the most popular stock in this table. On the other hand The Eastern Company (NASDAQ:EML) is the least popular one with only 4 bullish hedge fund positions. Cerulean Pharma Inc (NASDAQ:CERU) 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. In this regard TNXP might be a better candidate to consider a long position.