Were Hedge Funds Right About Dumping Collegium Pharmaceutical Inc (COLL) ?

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Collegium Pharmaceutical Inc (NASDAQ:COLL) makes for a good investment right now.

Collegium Pharmaceutical Inc (NASDAQ:COLL) has seen a decrease in activity from the world’s largest hedge funds of late. COLL was in 13 hedge funds’ portfolios at the end of December. There were 15 hedge funds in our database with COLL holdings at the end of the previous quarter. Our calculations also showed that coll isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Let’s take a look at the latest hedge fund action surrounding Collegium Pharmaceutical Inc (NASDAQ:COLL).

How are hedge funds trading Collegium Pharmaceutical Inc (NASDAQ:COLL)?

At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in COLL over the last 14 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with COLL Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alan Frazier’s Frazier Healthcare Partners has the most valuable position in Collegium Pharmaceutical Inc (NASDAQ:COLL), worth close to $32.4 million, comprising 8.4% of its total 13F portfolio. The second largest stake is held by Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, which holds a $27.6 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Israel Englander’s Millennium Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management and Joseph Edelman’s Perceptive Advisors.

Due to the fact that Collegium Pharmaceutical Inc (NASDAQ:COLL) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few hedgies that slashed their full holdings last quarter. Interestingly, Lee Ainslie’s Maverick Capital dumped the largest stake of all the hedgies tracked by Insider Monkey, worth about $6.2 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Collegium Pharmaceutical Inc (NASDAQ:COLL). These stocks are Solaris Oilfield Infrastructure, Inc. (NYSE:SOI), Karyopharm Therapeutics Inc (NASDAQ:KPTI), Textainer Group Holdings Limited (NYSE:TGH), and Virtus Investment Partners Inc (NASDAQ:VRTS). All of these stocks’ market caps match COLL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SOI 15 77167 1
KPTI 17 161898 -1
TGH 7 20962 0
VRTS 11 73397 -2
Average 12.5 83356 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $122 million in COLL’s case. Karyopharm Therapeutics Inc (NASDAQ:KPTI) is the most popular stock in this table. On the other hand Textainer Group Holdings Limited (NYSE:TGH) is the least popular one with only 7 bullish hedge fund positions. Collegium Pharmaceutical Inc (NASDAQ:COLL) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately COLL wasn’t nearly as popular as these 15 stock and hedge funds that were betting on COLL were disappointed as the stock returned -17.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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