Should I Avoid Lyra Therapeutics, Inc. (LYRA)?

In this article we will take a look at whether hedge funds think Lyra Therapeutics, Inc. (NASDAQ:LYRA) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Lyra Therapeutics, Inc. (NASDAQ:LYRA) has seen a decrease in activity from the world’s largest hedge funds in recent months. Lyra Therapeutics, Inc. (NASDAQ:LYRA) was in 5 hedge funds’ portfolios at the end of March. The all time high for this statistic is 8. There were 7 hedge funds in our database with LYRA positions at the end of the fourth quarter. Our calculations also showed that LYRA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Halbower of Pentwater Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $23 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s go over the latest hedge fund action regarding Lyra Therapeutics, Inc. (NASDAQ:LYRA).

Do Hedge Funds Think LYRA Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in LYRA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Perceptive Advisors, managed by Joseph Edelman, holds the most valuable position in Lyra Therapeutics, Inc. (NASDAQ:LYRA). Perceptive Advisors has a $37.3 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is Ikarian Capital, led by Neil Shahrestani, holding a $9 million position; 0.3% of its 13F portfolio is allocated to the company. Other peers that are bullish contain Guy Levy’s Soleus Capital, John Overdeck and David Siegel’s Two Sigma Advisors and Matthew Halbower’s Pentwater Capital Management. In terms of the portfolio weights assigned to each position Soleus Capital allocated the biggest weight to Lyra Therapeutics, Inc. (NASDAQ:LYRA), around 0.99% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, setting aside 0.47 percent of its 13F equity portfolio to LYRA.

Since Lyra Therapeutics, Inc. (NASDAQ:LYRA) has experienced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of hedgies who were dropping their full holdings in the first quarter. At the top of the heap, Peter Kolchinsky’s RA Capital Management dumped the largest position of the 750 funds watched by Insider Monkey, valued at close to $9.3 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $0.5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lyra Therapeutics, Inc. (NASDAQ:LYRA) but similarly valued. We will take a look at Pluristem Therapeutics Inc. (NASDAQ:PSTI), Aspen Group Inc. (NASDAQ:ASPU), Immutep Limited (NASDAQ:IMMP), Power REIT (NYSE:PW), Mackinac Financial Corporation (NASDAQ:MFNC), Colony Bankcorp Inc (NASDAQ:CBAN), and IMARA Inc. (NASDAQ:IMRA). This group of stocks’ market valuations match LYRA’s market valuation.

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As you can see these stocks had an average of 4.6 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $53 million in LYRA’s case. Pluristem Therapeutics Inc. (NASDAQ:PSTI) is the most popular stock in this table. On the other hand Power REIT (NYSE:PW) is the least popular one with only 2 bullish hedge fund positions. Lyra Therapeutics, Inc. (NASDAQ:LYRA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LYRA is 51.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately LYRA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on LYRA were disappointed as the stock returned -25.3% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.