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Should You Buy Coherus Biosciences Inc (CHRS)?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Coherus Biosciences Inc (NASDAQ:CHRS) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that CHRS isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

We’re going to take a glance at the latest hedge fund action regarding Coherus Biosciences Inc (NASDAQ:CHRS).

How have hedgies been trading Coherus Biosciences Inc (NASDAQ:CHRS)?

At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CHRS over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

CHRS_dec2018

More specifically, Hound Partners was the largest shareholder of Coherus Biosciences Inc (NASDAQ:CHRS), with a stake worth $33.2 million reported as of the end of September. Trailing Hound Partners was Citadel Investment Group, which amassed a stake valued at $31.9 million. OrbiMed Advisors, Farallon Capital, and Rock Springs Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were breaking ground themselves. Sectoral Asset Management, managed by Jerome Pfund and Michael Sjostrom, established the most outsized position in Coherus Biosciences Inc (NASDAQ:CHRS). Sectoral Asset Management had $0.5 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $0.3 million position during the quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Coherus Biosciences Inc (NASDAQ:CHRS) but similarly valued. We will take a look at Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (NYSE:EDN), Encore Capital Group, Inc. (NASDAQ:ECPG), Huron Consulting Group (NASDAQ:HURN), and Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA). This group of stocks’ market valuations match CHRS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EDN 7 16104 3
ECPG 8 60256 -4
HURN 11 27419 1
LTRPA 23 304324 2
Average 12.25 102026 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $160 million in CHRS’s case. Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) is the most popular stock in this table. On the other hand Empresa Distribuidora y Comercializadora Norte Sociedad Anónima (NYSE:EDN) is the least popular one with only 7 bullish hedge fund positions. Coherus Biosciences Inc (NASDAQ:CHRS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LTRPA might be a better candidate to consider a long position.

Disclosure: None. This article was originally published at Insider Monkey.

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