Were Hedge Funds Right About Souring On Collegium Pharmaceutical (COLL)?

Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Collegium Pharmaceutical Inc (NASDAQ:COLL) from the perspective of those elite funds.

Is Collegium Pharmaceutical Inc (NASDAQ:COLL) a great investment right now? Investors who are in the know are selling. The number of bullish hedge fund positions were cut by 4 lately. Our calculations also showed that COLL isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are viewed as worthless, old investment vehicles of yesteryear. While there are greater than 8000 funds trading today, Our experts look at the moguls of this group, approximately 750 funds. Most estimates calculate that this group of people have their hands on most of the smart money’s total capital, and by tracking their first-class equity investments, Insider Monkey has found various investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .


Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. We’re going to take a gander at the key hedge fund action surrounding Collegium Pharmaceutical Inc (NASDAQ:COLL).

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

At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in COLL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Kris Jenner - Rock Springs Capital

The largest stake in Collegium Pharmaceutical Inc (NASDAQ:COLL) was held by Frazier Healthcare Partners, which reported holding $24.8 million worth of stock at the end of March. It was followed by Rock Springs Capital Management with a $20.7 million position. Other investors bullish on the company included Sectoral Asset Management, Renaissance Technologies, and Eversept Partners.

Judging by the fact that Collegium Pharmaceutical Inc (NASDAQ:COLL) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers that decided to sell off their full holdings heading into Q3. At the top of the heap, Lee Ainslie’s Maverick Capital dumped the largest investment of the 750 funds tracked by Insider Monkey, comprising about $6 million in stock, and Bihua Chen’s Cormorant Asset Management was right behind this move, as the fund said goodbye to about $3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 4 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Collegium Pharmaceutical Inc (NASDAQ:COLL) but similarly valued. These stocks are CAI International Inc (NYSE:CAI), REX American Resources Corp (NYSE:REX), Sierra Wireless, Inc. (NASDAQ:SWIR), and Diplomat Pharmacy Inc (NYSE:DPLO). This group of stocks’ market values are closest to COLL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAI 14 115243 -2
REX 8 40085 2
SWIR 10 66704 -2
DPLO 8 70605 -6
Average 10 73159 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $71 million in COLL’s case. CAI International Inc (NYSE:CAI) is the most popular stock in this table. On the other hand REX American Resources Corp (NYSE:REX) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Collegium Pharmaceutical Inc (NASDAQ:COLL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately COLL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on COLL were disappointed as the stock returned -12.7% during the third quarter 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 in Q3.

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