The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought CymaBay Therapeutics Inc (NASDAQ:CBAY) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is CymaBay Therapeutics Inc (NASDAQ:CBAY) a bargain? Investors who are in the know were in a bullish mood. The number of long hedge fund positions improved by 10 lately. CymaBay Therapeutics Inc (NASDAQ:CBAY) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. Our calculations also showed that CBAY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a peek at the fresh hedge fund action surrounding CymaBay Therapeutics Inc (NASDAQ:CBAY).
What does smart money think about CymaBay Therapeutics Inc (NASDAQ:CBAY)?
At Q2’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 71% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CBAY over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Avoro Capital Advisors (venBio Select Advisor) held the most valuable stake in CymaBay Therapeutics Inc (NASDAQ:CBAY), which was worth $18.3 million at the end of the third quarter. On the second spot was D E Shaw which amassed $11.8 million worth of shares. Citadel Investment Group, Adage Capital Management, and Sio Capital 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 Foresite Capital allocated the biggest weight to CymaBay Therapeutics Inc (NASDAQ:CBAY), around 4.97% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, setting aside 2.34 percent of its 13F equity portfolio to CBAY.
As aggregate interest increased, some big names have been driving this bullishness. Foresite Capital, managed by Jim Tananbaum, established the most outsized position in CymaBay Therapeutics Inc (NASDAQ:CBAY). Foresite Capital had $5.6 million invested in the company at the end of the quarter. Julian Baker and Felix Baker’s Baker Bros. Advisors also initiated a $5.3 million position during the quarter. The other funds with brand new CBAY positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Steve Cohen’s Point72 Asset Management, and John W. Rende’s Copernicus Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to CymaBay Therapeutics Inc (NASDAQ:CBAY). These stocks are Alpha Pro Tech, Ltd. (NYSE:APT), Lydall, Inc. (NYSE:LDL), Protective Insurance Corporation (NASDAQ:PTVCA), Cheetah Mobile Inc (NYSE:CMCM), DermTech, Inc. (NASDAQ:DMTK), Liquidia Technologies, Inc. (NASDAQ:LQDA), and MediciNova, Inc. (NASDAQ:MNOV). This group of stocks’ market valuations are similar to CBAY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| APT | 8 | 21459 | 3 |
| LDL | 12 | 39388 | -2 |
| PTVCA | 2 | 2466 | 0 |
| CMCM | 5 | 5040 | 1 |
| DMTK | 7 | 36073 | 2 |
| LQDA | 16 | 66073 | 10 |
| MNOV | 4 | 1742 | -2 |
| Average | 7.7 | 24606 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.7 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $100 million in CBAY’s case. Liquidia Technologies, Inc. (NASDAQ:LQDA) is the most popular stock in this table. On the other hand Protective Insurance Corporation (NASDAQ:PTVCA) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks CymaBay Therapeutics Inc (NASDAQ:CBAY) is more popular among hedge funds. Our overall hedge fund sentiment score for CBAY is 84.8. 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 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 returned 21.3% in 2020 through September 25th but still managed to beat the market by 17.7 percentage points. Hedge funds were also right about betting on CBAY as the stock returned 86.5% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
