Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Zymeworks Inc. (NYSE:ZYME).
Zymeworks Inc. (NYSE:ZYME) was in 13 hedge funds’ portfolios at the end of the third quarter of 2018. ZYME shareholders have witnessed an increase in hedge fund interest in recent months. There were 12 hedge funds in our database with ZYME holdings at the end of the previous quarter. Our calculations also showed that zyme isn’t among the 30 most popular stocks among hedge funds.
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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 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.
We’re going to take a look at the recent hedge fund action encompassing Zymeworks Inc. (NYSE:ZYME).
What have hedge funds been doing with Zymeworks Inc. (NYSE:ZYME)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZYME over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Camber Capital Management was the largest shareholder of Zymeworks Inc. (NYSE:ZYME), with a stake worth $21.6 million reported as of the end of September. Trailing Camber Capital Management was Farallon Capital, which amassed a stake valued at $21 million. Baker Bros. Advisors, Perceptive Advisors, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers were breaking ground themselves. Great Point Partners, managed by Jeffrey Jay and David Kroin, assembled the largest position in Zymeworks Inc. (NYSE:ZYME). Great Point Partners had $3.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $1.3 million position during the quarter. The only other fund with a brand new ZYME position is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Zymeworks Inc. (NYSE:ZYME) but similarly valued. These stocks are Blackrock Muni Intermediate Drtn Fnd Inc (NYSE:MUI), Crawford & Company (NYSE:CRD), Financial Institutions, Inc. (NASDAQ:FISI), and Nemaura Medical Inc. (NASDAQ:NMRD). All of these stocks’ market caps are similar to ZYME’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MUI | 3 | 2322 | -2 |
| CRD | 7 | 17926 | 3 |
| FISI | 12 | 44875 | -1 |
| NMRD | 2 | 71 | 1 |
| Average | 6 | 16299 | 0.25 |
View table here if you experience formatting issues.
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 $16 million. That figure was $95 million in ZYME’s case. Financial Institutions, Inc. (NASDAQ:FISI) is the most popular stock in this table. On the other hand Nemaura Medical Inc. (NASDAQ:NMRD) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Zymeworks Inc. (NYSE:ZYME) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.