The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at CytomX Therapeutics Inc (NASDAQ:CTMX) from the perspective of those successful funds.
CytomX Therapeutics Inc (NASDAQ:CTMX) was in 7 hedge funds’ portfolios at the end of September. CTMX shareholders have witnessed a decrease in support from the world’s most successful money managers of late. There were 9 hedge funds in our database with CTMX positions at the end of the previous quarter. 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 Loxo Oncology Inc (NASDAQ:LOXO), Modine Manufacturing Co. (NYSE:MOD), and Amarin Corporation plc (ADR) (NASDAQ:AMRN) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Keeping this in mind, let’s analyze the new action regarding CytomX Therapeutics Inc (NASDAQ:CTMX).
Hedge fund activity in CytomX Therapeutics Inc (NASDAQ:CTMX)
Heading into the fourth quarter of 2016, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decrease of 22% from the second quarter of 2016. By comparison, 8 hedge funds held shares or bullish call options in CTMX heading into this year. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Deerfield Management, led by James E. Flynn, holds the biggest position in CytomX Therapeutics Inc (NASDAQ:CTMX). Deerfield Management has a $14.8 million position in the stock, comprising 0.7% of its 13F portfolio. On Deerfield Management’s heels is Redmile Group, led by Jeremy Green, which holds a $11.2 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Other peers that are bullish contain Mark Lampert’s Biotechnology Value Fund / BVF Inc, Bihua Chen’s Cormorant Asset Management and James A. Silverman’s Opaleye Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. At the top of the heap, Joseph Edelman’s Perceptive Advisors got rid of the biggest investment of all the investors monitored by Insider Monkey, totaling about $7.6 million in stock. Millennium Management, one of the 10 largest hedge funds in the world, also said goodbye to its stock, about $0.1 million worth.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as CytomX Therapeutics Inc (NASDAQ:CTMX) but similarly valued. These stocks are Loxo Oncology Inc (NASDAQ:LOXO), Modine Manufacturing Co. (NYSE:MOD), Amarin Corporation plc (ADR) (NASDAQ:AMRN), and TETRA Technologies, Inc. (NYSE:TTI). This group of stocks’ market caps are similar to CTMX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LOXO | 11 | 224908 | 1 |
| MOD | 10 | 43734 | -1 |
| AMRN | 19 | 221721 | 7 |
| TTI | 17 | 67275 | -6 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $139 million. That figure was $47 million in CTMX’s case. Amarin Corporation plc (ADR) (NASDAQ:AMRN) is the most popular stock in this table. On the other hand Modine Manufacturing Co. (NYSE:MOD) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks CytomX Therapeutics Inc (NASDAQ:CTMX) is even less popular than MOD. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
