CRH Medical Corporation (CRHM): Hedge Funds In Wait-and-See Mode
Debasis Saha
6 min read
The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded CRH Medical Corporation (NYSE:CRHM) based on those filings.
CRH Medical Corporation (NYSE:CRHM) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 7 hedge funds' portfolios at the end of March. At the end of this article we will also compare CRHM to other stocks including Fonar Corporation (NASDAQ:FONR), Erytech Pharma S.A. (NASDAQ:ERYP), and Plumas Bancorp (NASDAQ:PLBC) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Wil Harkey Nantahala Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's take a glance at the latest hedge fund action regarding CRH Medical Corporation (NYSE:CRHM).
Hedge fund activity in CRH Medical Corporation (NYSE:CRHM)
At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CRHM over the last 18 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Is CRHM A Good Stock To Buy?
Among these funds, Nantahala Capital Management held the most valuable stake in CRH Medical Corporation (NYSE:CRHM), which was worth $9.1 million at the end of the third quarter. On the second spot was Stadium Capital Management which amassed $4.7 million worth of shares. Renaissance Technologies, Royce & Associates, and D E Shaw 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 Stadium Capital Management allocated the biggest weight to CRH Medical Corporation (NYSE:CRHM), around 2.68% of its 13F portfolio. Nantahala Capital Management is also relatively very bullish on the stock, dishing out 0.34 percent of its 13F equity portfolio to CRHM.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).
Let's also examine hedge fund activity in other stocks similar to CRH Medical Corporation (NYSE:CRHM). We will take a look at Fonar Corporation (NASDAQ:FONR), Erytech Pharma S.A. (NASDAQ:ERYP), Plumas Bancorp (NASDAQ:PLBC), and CNX Resources Corporation (NYSE:CEIX). This group of stocks' market caps are similar to CRHM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FONR,9,9212,0 ERYP,2,3420,0 PLBC,2,3001,-1 CEIX,12,7463,-5 Average,6.25,5774,-1.5 [/table]
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $17 million in CRHM's case. CNX Resources Corporation (NYSE:CEIX) is the most popular stock in this table. On the other hand Erytech Pharma S.A. (NASDAQ:ERYP) is the least popular one with only 2 bullish hedge fund positions. CRH Medical Corporation (NYSE:CRHM) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on CRHM as the stock returned 90.3% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
