Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 8 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of CytomX Therapeutics, Inc. (NASDAQ:CTMX).
CytomX Therapeutics, Inc. (NASDAQ:CTMX) has seen an increase in support from the world's most elite money managers in recent months. Our calculations also showed that CTMX 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' 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 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 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.
We're going to take a look at the latest hedge fund action encompassing CytomX Therapeutics, Inc. (NASDAQ:CTMX).
How have hedgies been trading CytomX Therapeutics, Inc. (NASDAQ:CTMX)?
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2018. On the other hand, there were a total of 19 hedge funds with a bullish position in CTMX a year ago. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Perceptive Advisors held the most valuable stake in CytomX Therapeutics, Inc. (NASDAQ:CTMX), which was worth $34.1 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $13.9 million worth of shares. Moreover, Biotechnology Value Fund / BVF Inc, Great Point Partners, and Point72 Asset Management were also bullish on CytomX Therapeutics, Inc. (NASDAQ:CTMX), allocating a large percentage of their portfolios to this stock.
Now, some big names have jumped into CytomX Therapeutics, Inc. (NASDAQ:CTMX) headfirst. Biotechnology Value Fund / BVF Inc, managed by Mark Lampert, initiated the most outsized position in CytomX Therapeutics, Inc. (NASDAQ:CTMX). Biotechnology Value Fund / BVF Inc had $12.9 million invested in the company at the end of the quarter. Jeffrey Jay and David Kroin's Great Point Partners also made a $10.3 million investment in the stock during the quarter. The other funds with brand new CTMX positions are Julian Baker and Felix Baker's Baker Bros. Advisors, Ken Griffin's Citadel Investment Group, and Michael S. Weiss and Lindsay A. Rosenwald's Opus Point Partners Management.
Let's also examine hedge fund activity in other stocks similar to CytomX Therapeutics, Inc. (NASDAQ:CTMX). We will take a look at Prothena Corporation plc (NASDAQ:PRTA), Phunware, Inc. (NASDAQ:PHUN), Replimune Group, Inc. (NASDAQ:REPL), and Catchmark Timber Trust Inc (NYSE:CTT). This group of stocks' market valuations resemble CTMX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRTA,22,242026,9 PHUN,8,20348,6 REPL,5,75343,-1 CTT,9,48454,-1 Average,11,96543,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $93 million in CTMX's case. Prothena Corporation plc (NASDAQ:PRTA) is the most popular stock in this table. On the other hand Replimune Group, Inc. (NASDAQ:REPL) is the least popular one with only 5 bullish hedge fund positions. CytomX Therapeutics, Inc. (NASDAQ:CTMX) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 CTMX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CTMX were disappointed as the stock returned -7.3% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.