Hedge Funds Are Crazy About Cytokinetics, Inc. (CYTK)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Cytokinetics, Inc. (NASDAQ:CYTK).

Is Cytokinetics, Inc. (NASDAQ:CYTK) a good investment now? The best stock pickers were taking a bullish view. The number of bullish hedge fund positions advanced by 2 lately. Cytokinetics, Inc. (NASDAQ:CYTK) was in 31 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CYTK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At the moment there are dozens of gauges stock traders put to use to evaluate publicly traded companies. Some of the best gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can trounce their index-focused peers by a significant margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s check out the recent hedge fund action encompassing Cytokinetics, Inc. (NASDAQ:CYTK).

Do Hedge Funds Think CYTK Is A Good Stock To Buy Now?

At Q2’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CYTK over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Driehaus Capital was the largest shareholder of Cytokinetics, Inc. (NASDAQ:CYTK), with a stake worth $61.3 million reported as of the end of June. Trailing Driehaus Capital was Farallon Capital, which amassed a stake valued at $56.9 million. Polar Capital, Partner Fund Management, and Integral Health Asset Management 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 Burrage Capital Management allocated the biggest weight to Cytokinetics, Inc. (NASDAQ:CYTK), around 4.85% of its 13F portfolio. Commodore Capital is also relatively very bullish on the stock, earmarking 4.8 percent of its 13F equity portfolio to CYTK.

As industrywide interest jumped, specific money managers have been driving this bullishness. Commodore Capital, managed by Egen Atkinson and Michael Kramarz, initiated the most outsized position in Cytokinetics, Inc. (NASDAQ:CYTK). Commodore Capital had $13.9 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also made a $5.3 million investment in the stock during the quarter. The following funds were also among the new CYTK investors: Renaissance Technologies, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Mika Toikka’s AlphaCrest Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cytokinetics, Inc. (NASDAQ:CYTK) but similarly valued. These stocks are Franchise Group, Inc. (NASDAQ:FRG), Uniqure NV (NASDAQ:QURE), Kosmos Energy Ltd (NYSE:KOS), FARO Technologies, Inc. (NASDAQ:FARO), Extreme Networks, Inc (NASDAQ:EXTR), Houghton Mifflin Harcourt Co (NASDAQ:HMHC), and IAMGOLD Corporation (NYSE:IAG). This group of stocks’ market caps are similar to CYTK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $420 million in CYTK’s case. Uniqure NV (NASDAQ:QURE) is the most popular stock in this table. On the other hand FARO Technologies, Inc. (NASDAQ:FARO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Cytokinetics, Inc. (NASDAQ:CYTK) is more popular among hedge funds. Our overall hedge fund sentiment score for CYTK is 87. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on CYTK as the stock returned 86.4% since the end of June (through 10/15) 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.