While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and optimism towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the first quarter and hedging or reducing many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding CymaBay Therapeutics Inc (NASDAQ:CBAY).
CymaBay Therapeutics Inc (NASDAQ:CBAY) has experienced an increase in hedge fund sentiment lately. CBAY was in 29 hedge funds' portfolios at the end of March. There were 27 hedge funds in our database with CBAY holdings at the end of the previous quarter. Our calculations also showed that cbay isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a glance at the new hedge fund action surrounding CymaBay Therapeutics Inc (NASDAQ:CBAY).
What have hedge funds been doing with CymaBay Therapeutics Inc (NASDAQ:CBAY)?
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. By comparison, 23 hedge funds held shares or bullish call options in CBAY a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Baker Bros. Advisors held the most valuable stake in CymaBay Therapeutics Inc (NASDAQ:CBAY), which was worth $75.8 million at the end of the first quarter. On the second spot was Perceptive Advisors which amassed $55.9 million worth of shares. Moreover, Redmile Group, Citadel Investment Group, and Adage Capital Management were also bullish on CymaBay Therapeutics Inc (NASDAQ:CBAY), allocating a large percentage of their portfolios to this stock.
Now, some big names were leading the bulls' herd. OrbiMed Advisors, managed by Samuel Isaly, created the most outsized position in CymaBay Therapeutics Inc (NASDAQ:CBAY). OrbiMed Advisors had $24.9 million invested in the company at the end of the quarter. Ken Greenberg and David Kim's Ghost Tree Capital also initiated a $10 million position during the quarter. The other funds with brand new CBAY positions are Behzad Aghazadeh's venBio Select Advisor, Arthur B Cohen and Joseph Healey's Healthcor Management LP, and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks similar to CymaBay Therapeutics Inc (NASDAQ:CBAY). We will take a look at Navigant Consulting, Inc. (NYSE:NCI), Monarch Casino & Resort, Inc. (NASDAQ:MCRI), Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX), and ArcBest Corp (NASDAQ:ARCB). All of these stocks' market caps are similar to CBAY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NCI,15,27692,-2 MCRI,10,130391,0 BLX,1,6043,0 ARCB,12,59795,2 Average,9.5,55980,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $56 million. That figure was $407 million in CBAY's case. Navigant Consulting, Inc. (NYSE:NCI) is the most popular stock in this table. On the other hand Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks CymaBay Therapeutics Inc (NASDAQ:CBAY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CBAY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CBAY were disappointed as the stock returned -10.4% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
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