Was The Smart Money Right About Constellation Pharmaceuticals (CNST)?

Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) in this article.

Is Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) going to take off soon? The smart money is getting more bullish. The number of bullish hedge fund bets inched up by 19 lately. Our calculations also showed that CNST isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). CNST was in 27 hedge funds’ portfolios at the end of December. There were 8 hedge funds in our database with CNST holdings at the end of the previous quarter.

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We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the “next Amazon” in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to view the fresh hedge fund action surrounding Constellation Pharmaceuticals, Inc. (NASDAQ:CNST).

What have hedge funds been doing with Constellation Pharmaceuticals, Inc. (NASDAQ:CNST)?

At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 238% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CNST over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

More specifically, Avoro Capital Advisors (venBio Select Advisor) was the largest shareholder of Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), with a stake worth $172 million reported as of the end of September. Trailing Avoro Capital Advisors (venBio Select Advisor) was Cormorant Asset Management, which amassed a stake valued at $108.4 million. Casdin Capital, Great Point Partners, and Vivo Capital 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 P.A.W. CAPITAL PARTNERS allocated the biggest weight to Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), around 5.53% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, earmarking 5.25 percent of its 13F equity portfolio to CNST.

Now, key money managers were leading the bulls’ herd. Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, initiated the biggest position in Constellation Pharmaceuticals, Inc. (NASDAQ:CNST). Avoro Capital Advisors (venBio Select Advisor) had $172 million invested in the company at the end of the quarter. Jeffrey Jay and David Kroin’s Great Point Partners also initiated a $53.5 million position during the quarter. The other funds with new positions in the stock are Albert Cha and Frank Kung’s Vivo Capital, Ken Greenberg and David Kim’s Ghost Tree Capital, and Israel Englander’s Millennium Management.

Let’s now take a look at hedge fund activity in other stocks similar to Constellation Pharmaceuticals, Inc. (NASDAQ:CNST). We will take a look at Saul Centers Inc (NYSE:BFS), Range Resources Corp. (NYSE:RRC), Brigham Minerals, Inc. (NYSE:MNRL), and Ferro Corporation (NYSE:FOE). All of these stocks’ market caps match CNST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BFS 8 41810 -5
RRC 29 334202 2
MNRL 23 140394 9
FOE 16 159061 -1
Average 19 168867 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $585 million in CNST’s case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Saul Centers Inc (NYSE:BFS) is the least popular one with only 8 bullish hedge fund positions. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately CNST wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CNST were disappointed as the stock returned -24.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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