A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Carbylan Therapeutics Inc (NASDAQ:CBYL) during the quarter.
Carbylan Therapeutics Inc (NASDAQ:CBYL) investors should be aware of a decrease in hedge fund sentiment recently. Some investors might have seen it coming, considering that the stock lost over 50% of its value during the third quarter. For an in-depth understanding of the hedge fund sentiment, we will cover hedge funds and institutional investors that held stakes in the company, at the end of September.
The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as BIND Therapeutics Inc (NASDAQ:BIND), Intermolecular Inc (NASDAQ:IMI), and Gastar Exploration Inc (NYSEMKT:GST) to gather more data points.
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In the financial world, there are a large number of formulas shareholders have at their disposal to evaluate publicly traded companies. Two of the less utilized formulas are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the elite investment managers can outclass their index-focused peers by a healthy margin (see the details here).
Now, let’s review the new action surrounding Carbylan Therapeutics Inc (NASDAQ:CBYL).
Hedge fund activity in Carbylan Therapeutics Inc (NASDAQ:CBYL)
At the end of the last quarter, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 17% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Broadfin Capital, managed by Kevin Kotler, holds the most valuable position in Carbylan Therapeutics Inc (NASDAQ:CBYL). Broadfin Capital has a $4.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Pentwater Capital Management, managed by Matthew Halbower, which holds a $0.4 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism consist of Anand Parekh’s Alyeska Investment Group, Leon Cooperman’s Omega Advisors, and Efrem Kamen’s Pura Vida Investments.
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 here because none of the 700+ hedge funds tracked by Insider Monkey identified Carbylan Therapeutics Inc (NASDAQ:CBYL) as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks similar to Carbylan Therapeutics Inc (NASDAQ:CBYL). These stocks are BIND Therapeutics Inc (NASDAQ:BIND), Intermolecular Inc (NASDAQ:IMI), Gastar Exploration Inc (NYSEMKT:GST), and STG Group Inc (OTCMKTS:GDEF). This group of stocks’ market caps are similar to Carbylan Therapeutics Inc (NASDAQ:CBYL)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BIND | 4 | 1938 | -1 |
| IMI | 6 | 25271 | 1 |
| GST | 6 | 2738 | -3 |
| GDEF | 6 | 21596 | -1 |
As you can see, these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $6 million in Carbylan Therapeutics Inc (NASDAQ:CBYL)’s case. Intermolecular Inc (NASDAQ:IMI) is the most popular stock in this table. On the other hand, BIND Therapeutics Inc (NASDAQ:BIND) is the least popular one with only 4 bullish hedge fund positions. Carbylan Therapeutics Inc (NASDAQ: CBYL) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Intermolecular Inc (NASDAQ:IMI) might be a better candidate to consider a long position.
