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 in recent 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 certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Zymeworks Inc. (NYSE:ZYME).
Zymeworks Inc. (NYSE:ZYME) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that zyme isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a lot of methods investors have at their disposal to evaluate stocks. A duo of the most underrated methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outclass the S&P 500 by a healthy margin (see the details here).
We’re going to take a glance at the latest hedge fund action regarding Zymeworks Inc. (NYSE:ZYME).
What have hedge funds been doing with Zymeworks Inc. (NYSE:ZYME)?
Heading into the first quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in ZYME a year ago. So, let’s see 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, Stephen DuBois’s Camber Capital Management has the largest position in Zymeworks Inc. (NYSE:ZYME), worth close to $31.8 million, accounting for 1.5% of its total 13F portfolio. Sitting at the No. 2 spot is Baker Bros. Advisors, managed by Julian Baker and Felix Baker, which holds a $25.1 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions contain Thomas Steyer’s Farallon Capital, Albert Cha and Frank Kung’s Vivo Capital and Joseph Edelman’s Perceptive Advisors.
Since Zymeworks Inc. (NYSE:ZYME) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that slashed their entire stakes heading into Q3. It’s worth mentioning that Jeffrey Jay and David Kroin’s Great Point Partners said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $3.8 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $1.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q3.
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 Mercantile Bank Corp. (NASDAQ:MBWM), CymaBay Therapeutics Inc (NASDAQ:CBAY), Front Yard Residential Corporation (NYSE:RESI), and Natural Resource Partners LP (NYSE:NRP). 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 |
|---|---|---|---|
| MBWM | 6 | 24700 | -2 |
| CBAY | 27 | 186903 | 4 |
| RESI | 13 | 24911 | -2 |
| NRP | 4 | 8080 | -1 |
| Average | 12.5 | 61149 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $103 million in ZYME’s case. CymaBay Therapeutics Inc (NASDAQ:CBAY) is the most popular stock in this table. On the other hand Natural Resource Partners LP (NYSE:NRP) is the least popular one with only 4 bullish hedge fund positions. Zymeworks Inc. (NYSE:ZYME) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately ZYME wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); ZYME investors were disappointed as the stock returned 12.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
