How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding CymaBay Therapeutics Inc (NASDAQ:CBAY).
Is CymaBay Therapeutics Inc (NASDAQ:CBAY) ready to rally soon? Hedge funds were cutting their exposure. The number of bullish hedge fund bets fell by 1 in recent months. CymaBay Therapeutics Inc (NASDAQ:CBAY) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that CBAY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 19 hedge funds in our database with CBAY holdings at the end of December.
In today’s marketplace there are numerous metrics market participants employ to appraise their stock investments. Two of the less utilized metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can outperform the S&P 500 by a very impressive amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Felix Baker of Baker Bros.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind let’s take a look at the latest hedge fund action surrounding CymaBay Therapeutics Inc (NASDAQ:CBAY).
Do Hedge Funds Think CBAY Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in CBAY a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
Among these funds, Avoro Capital Advisors (venBio Select Advisor) held the most valuable stake in CymaBay Therapeutics Inc (NASDAQ:CBAY), which was worth $46.8 million at the end of the fourth quarter. On the second spot was Commodore Capital which amassed $13.5 million worth of shares. Baker Bros. Advisors, Millennium Management, and Foresite Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to CymaBay Therapeutics Inc (NASDAQ:CBAY), around 6.55% of its 13F portfolio. Commodore Capital is also relatively very bullish on the stock, dishing out 5.33 percent of its 13F equity portfolio to CBAY.
Because CymaBay Therapeutics Inc (NASDAQ:CBAY) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few hedge funds that slashed their entire stakes last quarter. Interestingly, Albert Cha and Frank Kung’s Vivo Capital dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth about $3.4 million in stock, and Andre F. Perold’s HighVista Strategies was right behind this move, as the fund said goodbye to about $0.7 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CymaBay Therapeutics Inc (NASDAQ:CBAY) but similarly valued. We will take a look at WhiteHorse Finance, Inc. (NASDAQ:WHF), United Insurance Holdings Corp. (NASDAQ:UIHC), Silicom Ltd. (NASDAQ:SILC), Landec Corporation (NASDAQ:LNDC), Heritage Insurance Holdings Inc (NYSE:HRTG), Howard Bancorp Inc (NASDAQ:HBMD), and CTO Realty Growth Inc (NYSE:CTO). This group of stocks’ market valuations match CBAY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WHF | 3 | 2144 | 1 |
| UIHC | 7 | 9692 | -2 |
| SILC | 10 | 23118 | 1 |
| LNDC | 13 | 74030 | 0 |
| HRTG | 12 | 37386 | -2 |
| HBMD | 4 | 22727 | 0 |
| CTO | 13 | 22691 | 0 |
| Average | 8.9 | 27398 | -0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $122 million in CBAY’s case. Landec Corporation (NASDAQ:LNDC) is the most popular stock in this table. On the other hand WhiteHorse Finance, Inc. (NASDAQ:WHF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks CymaBay Therapeutics Inc (NASDAQ:CBAY) is more popular among hedge funds. Our overall hedge fund sentiment score for CBAY is 72.6. 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 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 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately CBAY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CBAY were disappointed as the stock returned -9% since the end of the first quarter (through 7/23) 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 most of these stocks already outperformed the market since 2019.
Follow Cymabay Therapeutics Inc. (NASDAQ:CBAY)
Follow Cymabay Therapeutics Inc. (NASDAQ:CBAY)
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Disclosure: None. This article was originally published at Insider Monkey.
