The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. Stocks kept going up since then. In this article we look at how hedge funds traded Zymeworks Inc. (NYSE:ZYME) and determine whether the smart money was really smart about this stock.
Zymeworks Inc. (NYSE:ZYME) has experienced an increase in hedge fund interest lately. Zymeworks Inc. (NYSE:ZYME) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 27 hedge funds in our database with ZYME holdings at the end of March. Our calculations also showed that ZYME 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.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Felix Baker of Baker Bros.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind we’re going to check out the new hedge fund action encompassing Zymeworks Inc. (NYSE:ZYME).
What have hedge funds been doing with Zymeworks Inc. (NYSE:ZYME)?
At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in ZYME a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Joseph Edelman’s Perceptive Advisors has the largest position in Zymeworks Inc. (NYSE:ZYME), worth close to $129.2 million, accounting for 2.1% of its total 13F portfolio. On Perceptive Advisors’s heels is Great Point Partners, led by Jeffrey Jay and David Kroin, holding a $92.9 million position; the fund has 7.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Julian Baker and Felix Baker’s Baker Bros. Advisors, Michael Rockefeller and KarláKroeker’s Woodline Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Soleus Capital allocated the biggest weight to Zymeworks Inc. (NYSE:ZYME), around 8.65% of its 13F portfolio. Great Point Partners is also relatively very bullish on the stock, setting aside 7.42 percent of its 13F equity portfolio to ZYME.
Consequently, key money managers were leading the bulls’ herd. Armistice Capital, managed by Steven Boyd, created the largest position in Zymeworks Inc. (NYSE:ZYME). Armistice Capital had $28.1 million invested in the company at the end of the quarter. Eli Casdin’s Casdin Capital also made a $4.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Kamran Moghtaderi’s Eversept Partners, and Michael Gelband’s ExodusPoint Capital.
Let’s now review hedge fund activity in other stocks similar to Zymeworks Inc. (NYSE:ZYME). We will take a look at CareTrust REIT Inc (NASDAQ:CTRE), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Viper Energy Partners LP (NASDAQ:VNOM), Plains GP Holdings LP (NYSE:PAGP), Ameris Bancorp (NASDAQ:ABCB), Innovative Industrial Properties, Inc. (NYSE:IIPR), and Hub Group Inc (NASDAQ:HUBG). This group of stocks’ market valuations are similar to ZYME’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTRE | 19 | 57146 | 12 |
| IRWD | 32 | 369498 | 4 |
| VNOM | 10 | 40175 | -1 |
| PAGP | 19 | 109862 | -3 |
| ABCB | 17 | 82148 | 4 |
| IIPR | 20 | 185487 | 6 |
| HUBG | 21 | 199671 | 4 |
| Average | 19.7 | 149141 | 3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $601 million in ZYME’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 10 bullish hedge fund positions. Zymeworks Inc. (NYSE:ZYME) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ZYME is 86.7. 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 gained 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on ZYME as the stock returned 15.7% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
