Where Do Hedge Funds Stand On CareDx, Inc. (CDNA)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards CareDx, Inc. (NASDAQ:CDNA).

Is CareDx, Inc. (NASDAQ:CDNA) going to take off soon? Money managers were getting more bullish. The number of bullish hedge fund positions inched up by 3 in recent months. CareDx, Inc. (NASDAQ:CDNA) was in 23 hedge funds’ portfolios at the end of March. The all time high for this statistic is 25. Our calculations also showed that CDNA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 20 hedge funds in our database with CDNA holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a glance at the latest hedge fund action encompassing CareDx, Inc. (NASDAQ:CDNA).

Do Hedge Funds Think CDNA Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in CDNA a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Catherine D. Wood’s ARK Investment Management has the number one position in CareDx, Inc. (NASDAQ:CDNA), worth close to $303.7 million, amounting to 0.6% of its total 13F portfolio. On ARK Investment Management’s heels is David Goel and Paul Ferri of Matrix Capital Management, with a $98 million position; 1.1% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism encompass D. E. Shaw’s D E Shaw, Eli Casdin’s Casdin Capital and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to CareDx, Inc. (NASDAQ:CDNA), around 2.42% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, setting aside 1.73 percent of its 13F equity portfolio to CDNA.

As industrywide interest jumped, specific money managers have jumped into CareDx, Inc. (NASDAQ:CDNA) headfirst. Matrix Capital Management, managed by David Goel and Paul Ferri, created the most outsized position in CareDx, Inc. (NASDAQ:CDNA). Matrix Capital Management had $98 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $2.2 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Renaissance Technologies, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CareDx, Inc. (NASDAQ:CDNA) but similarly valued. These stocks are Mantech International Corp (NASDAQ:MANT), Rogers Corporation (NYSE:ROG), Grocery Outlet Holding Corp. (NASDAQ:GO), Moelis & Company (NYSE:MC), Insmed Incorporated (NASDAQ:INSM), Extended Stay America Inc (NYSE:STAY), and FormFactor, Inc. (NASDAQ:FORM). All of these stocks’ market caps are similar to CDNA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MANT 14 34971 3
ROG 17 228144 -3
GO 15 56182 -2
MC 19 142103 -1
INSM 22 573375 -6
STAY 39 905852 16
FORM 17 156169 -1
Average 20.4 299542 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $300 million. That figure was $693 million in CDNA’s case. Extended Stay America Inc (NYSE:STAY) is the most popular stock in this table. On the other hand Mantech International Corp (NASDAQ:MANT) is the least popular one with only 14 bullish hedge fund positions. CareDx, Inc. (NASDAQ:CDNA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CDNA is 53.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on CDNA, though not to the same extent, as the stock returned 15.8% since Q1 (through July 16th) and outperformed the market as well.

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