Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 24.4% compared to 20.4%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
CytomX Therapeutics, Inc. (NASDAQ:CTMX) was in 15 hedge funds’ portfolios at the end of the second quarter of 2019. CTMX investors should pay attention to a decrease in hedge fund interest of late. There were 18 hedge funds in our database with CTMX positions at the end of the previous quarter. Our calculations also showed that CTMX isn’t among the 30 most popular stocks among hedge funds (see the video below).
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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 take a look at the key hedge fund action surrounding CytomX Therapeutics, Inc. (NASDAQ:CTMX).
What have hedge funds been doing with CytomX Therapeutics, Inc. (NASDAQ:CTMX)?
At Q2’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CTMX over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in CytomX Therapeutics, Inc. (NASDAQ:CTMX) was held by Perceptive Advisors, which reported holding $35.4 million worth of stock at the end of March. It was followed by Biotechnology Value Fund / BVF Inc with a $21 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and D E Shaw.
Due to the fact that CytomX Therapeutics, Inc. (NASDAQ:CTMX) has experienced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of fund managers who were dropping their entire stakes by the end of the second quarter. It’s worth mentioning that Jeffrey Jay and David Kroin’s Great Point Partners dropped the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $10.3 million in stock. Marc Schneidman’s fund, Aquilo Capital Management, also dumped its stock, about $1.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as CytomX Therapeutics, Inc. (NASDAQ:CTMX) but similarly valued. These stocks are Teekay Offshore Partners L.P. (NYSE:TOO), Axcelis Technologies Inc (NASDAQ:ACLS), Star Group, L.P. (NYSE:SGU), and Priority Technology Holdings, Inc. (NASDAQ:PRTH). This group of stocks’ market valuations are closest to CTMX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TOO | 6 | 2852 | -2 |
| ACLS | 14 | 60419 | -2 |
| SGU | 8 | 97903 | 0 |
| PRTH | 2 | 5077 | 0 |
| Average | 7.5 | 41563 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $93 million in CTMX’s case. Axcelis Technologies Inc (NASDAQ:ACLS) is the most popular stock in this table. On the other hand Priority Technology Holdings, Inc. (NASDAQ:PRTH) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks CytomX Therapeutics, Inc. (NASDAQ:CTMX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CTMX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CTMX were disappointed as the stock returned -34.2% 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 among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
