Cumberland Pharmaceuticals, Inc. (CPIX): Hedge Funds In Wait-and-See Mode
With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX).
Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of the third quarter of 2019. At the end of this article we will also compare CPIX to other stocks including Four Seasons Education (Cayman) Inc. (NYSE:FEDU), TransAct Technologies Incorporated (NASDAQ:TACT), and Profire Energy, Inc. (NASDAQ:PFIE) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_731890" align="aligncenter" width="450"]
John Rogers of Ariel Investments[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's take a gander at the recent hedge fund action regarding Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX).
How have hedgies been trading Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in CPIX a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) was held by Ariel Investments, which reported holding $5.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.8 million position. The only other hedge fund that is bullish on the company was Bailard Inc.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) but similarly valued. We will take a look at Four Seasons Education (Cayman) Inc. (NYSE:FEDU), TransAct Technologies Incorporated (NASDAQ:TACT), Profire Energy, Inc. (NASDAQ:PFIE), and Frontier Communications Corporation (NASDAQ:FTR). This group of stocks' market caps resemble CPIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FEDU,4,5149,-1 TACT,5,9234,-1 PFIE,8,8100,-1 FTR,12,6158,0 Average,7.25,7160,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $9 million in CPIX's case. Frontier Communications Corporation (NASDAQ:FTR) is the most popular stock in this table. On the other hand Four Seasons Education (Cayman) Inc. (NYSE:FEDU) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) is even less popular than FEDU. Hedge funds dodged a bullet by taking a bearish stance towards CPIX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CPIX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CPIX investors were disappointed as the stock returned -19.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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