Avid Bioservices, Inc. (CDMO) Fell Out Of Favor With Hedge Funds?

In this article we will analyze whether Avid Bioservices, Inc. (NASDAQ:CDMO) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Avid Bioservices, Inc. (NASDAQ:CDMO) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of September. Our calculations also showed that CDMO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Pulmonx Corporation (NASDAQ:LUNG), Berkshire Hills Bancorp, Inc. (NYSE:BHLB), and Cardiovascular Systems Inc (NASDAQ:CSII) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we’re going to take a look at the fresh hedge fund action surrounding Avid Bioservices, Inc. (NASDAQ:CDMO).

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

At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in CDMO a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Avid Bioservices, Inc. (NASDAQ:CDMO) was held by AltraVue Capital, which reported holding $53.2 million worth of stock at the end of September. It was followed by Iszo Capital with a $50.6 million position. Other investors bullish on the company included Driehaus Capital, Millennium Management, and Parkman Healthcare Partners. In terms of the portfolio weights assigned to each position Iszo Capital allocated the biggest weight to Avid Bioservices, Inc. (NASDAQ:CDMO), around 22.33% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, designating 7.86 percent of its 13F equity portfolio to CDMO.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Caxton Associates LP. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Soleus Capital).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Avid Bioservices, Inc. (NASDAQ:CDMO) but similarly valued. We will take a look at Pulmonx Corporation (NASDAQ:LUNG), Berkshire Hills Bancorp, Inc. (NYSE:BHLB), Cardiovascular Systems Inc (NASDAQ:CSII), Avid Technology, Inc. (NASDAQ:AVID), Primoris Services Corp (NASDAQ:PRIM), Berkeley Lights, Inc. (NASDAQ:BLI), and Getty Realty Corp. (NYSE:GTY). This group of stocks’ market values resemble CDMO’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $178 million. That figure was $195 million in CDMO’s case. Pulmonx Corporation (NASDAQ:LUNG) is the most popular stock in this table. On the other hand Getty Realty Corp. (NYSE:GTY) is the least popular one with only 7 bullish hedge fund positions. Avid Bioservices, Inc. (NASDAQ:CDMO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CDMO is 76.9. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on CDMO as the stock returned 35.3% since the end of Q3 (through 12/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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