Are Hedge Funds Going To Get Burned By Cronos Group Inc. (CRON) ?

Nina Todic

Mon, Oct 14, 2019, 6:48 PM

The financial regulations require hedge funds and wealthy investors that crossed 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 June 28th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Cronos Group Inc. (NASDAQ:CRON) based on those filings.

Is Cronos Group Inc. (NASDAQ:CRON) a bargain? Prominent investors are becoming more confident. The number of long hedge fund bets increased by 1 in recent months. Our calculations also showed that CRON isn't among the 30 most popular stocks among hedge funds.

To most market participants, hedge funds are seen as worthless, old financial tools of yesteryear. While there are over 8000 funds with their doors open at the moment, Our experts choose to focus on the leaders of this group, around 750 funds. Most estimates calculate that this group of people oversee the lion's share of all hedge funds' total capital, and by monitoring their matchless picks, Insider Monkey has deciphered a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per year 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 some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the latest hedge fund action surrounding Cronos Group Inc. (NASDAQ:CRON).

How have hedgies been trading Cronos Group Inc. (NASDAQ:CRON)?

At the end of the second quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRON over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Cronos Group Inc. (NASDAQ:CRON) was held by Two Sigma Advisors, which reported holding $14.3 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $11.5 million position. Other investors bullish on the company included D E Shaw, OZ Management, and Citadel Investment Group.

Now, specific money managers were breaking ground themselves. D E Shaw, managed by D. E. Shaw, established the largest position in Cronos Group Inc. (NASDAQ:CRON). D E Shaw had $5.4 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with brand new CRON positions are Matthew Hulsizer's PEAK6 Capital Management, Philip Hempleman's Ardsley Partners, and George Zweig, Shane Haas and Ravi Chander's Signition LP.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Cronos Group Inc. (NASDAQ:CRON) but similarly valued. These stocks are Insperity Inc (NYSE:NSP), Ascendis Pharma A/S (NASDAQ:ASND), New Relic Inc (NYSE:NEWR), and Acuity Brands, Inc. (NYSE:AYI). All of these stocks' market caps resemble CRON's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSP,24,391193,0 ASND,33,2602951,-2 NEWR,29,278012,2 AYI,23,928702,-6 Average,27.25,1050215,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $1050 million. That figure was $25 million in CRON's case. Ascendis Pharma A/S (NASDAQ:ASND) is the most popular stock in this table. On the other hand Acuity Brands, Inc. (NYSE:AYI) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Cronos Group Inc. (NASDAQ:CRON) is even less popular than AYI. Hedge funds dodged a bullet by taking a bearish stance towards CRON. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CRON wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CRON investors were disappointed as the stock returned -43.4% 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019.