Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Cytokinetics, Inc. (NASDAQ:CYTK) based on that data and determine whether they were really smart about the stock.
Is Cytokinetics, Inc. (NASDAQ:CYTK) a buy here? The smart money was getting more optimistic. The number of bullish hedge fund positions inched up by 4 in recent months. Cytokinetics, Inc. (NASDAQ:CYTK) was in 26 hedge funds' portfolios at the end of June. The all time high for this statistics is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CYTK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 22 hedge funds in our database with CYTK positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let's view the new hedge fund action regarding Cytokinetics, Inc. (NASDAQ:CYTK).
How are hedge funds trading Cytokinetics, Inc. (NASDAQ:CYTK)?
At Q2's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in CYTK a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Consonance Capital Management was the largest shareholder of Cytokinetics, Inc. (NASDAQ:CYTK), with a stake worth $78.9 million reported as of the end of September. Trailing Consonance Capital Management was Driehaus Capital, which amassed a stake valued at $73.3 million. Great Point Partners, Farallon Capital, and Millennium Management 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 Consonance Capital Management allocated the biggest weight to Cytokinetics, Inc. (NASDAQ:CYTK), around 4.73% of its 13F portfolio. Burrage Capital Management is also relatively very bullish on the stock, designating 4.31 percent of its 13F equity portfolio to CYTK.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the most outsized position in Cytokinetics, Inc. (NASDAQ:CYTK). LMR Partners had $26 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley's Polar Capital also initiated a $11.8 million position during the quarter. The other funds with brand new CYTK positions are James A. Silverman's Opaleye Management, Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management, and Renaissance Technologies.
Let's now take a look at hedge fund activity in other stocks similar to Cytokinetics, Inc. (NASDAQ:CYTK). We will take a look at Avanos Medical (NYSE:AVNS), Aurora Cannabis Inc. (NASDAQ:ACB), Silk Road Medical, Inc. (NASDAQ:SILK), Renasant Corporation (NASDAQ:RNST), Knowles Corp (NYSE:KN), Revance Therapeutics Inc (NASDAQ:RVNC), and Akcea Therapeutics, Inc. (NASDAQ:AKCA). This group of stocks' market valuations are similar to CYTK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVNS,15,168412,-1 ACB,10,42330,1 SILK,20,103752,8 RNST,10,8447,-2 KN,24,236994,4 RVNC,14,109451,3 AKCA,11,19426,0 Average,14.9,98402,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $391 million in CYTK's case. Knowles Corp (NYSE:KN) is the most popular stock in this table. On the other hand Aurora Cannabis Inc. (NASDAQ:ACB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Cytokinetics, Inc. (NASDAQ:CYTK) is more popular among hedge funds. Our overall hedge fund sentiment score for CYTK is 89. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately CYTK wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CYTK were disappointed as the stock returned -0.7% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.