Hedge Funds Are Piling Into Lyra Therapeutics, Inc. (LYRA)

In this article you are going to find out whether hedge funds think Lyra Therapeutics, Inc. (NASDAQ:LYRA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Lyra Therapeutics, Inc. (NASDAQ:LYRA) ready to rally soon? Money managers were taking a bullish view. The number of bullish hedge fund bets inched up by 5 in recent months. Lyra Therapeutics, Inc. (NASDAQ:LYRA) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 8. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LYRA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 5 hedge funds in our database with LYRA holdings at the end of March.

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 79 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.

Keeping this in mind we’re going to go over the key hedge fund action surrounding Lyra Therapeutics, Inc. (NASDAQ:LYRA).

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

At second quarter’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 100% from the first quarter of 2020. On the other hand, there were a total of 8 hedge funds with a bullish position in LYRA 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 increasing their stakes substantially (or already accumulated large positions).

The largest stake in Lyra Therapeutics, Inc. (NASDAQ:LYRA) was held by Perceptive Advisors, which reported holding $25.9 million worth of stock at the end of June. It was followed by Ikarian Capital with a $5 million position. Other investors bullish on the company included Pura Vida Investments, Soleus Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Ikarian Capital allocated the biggest weight to Lyra Therapeutics, Inc. (NASDAQ:LYRA), around 0.41% of its 13F portfolio. Perceptive Advisors is also relatively very bullish on the stock, dishing out 0.34 percent of its 13F equity portfolio to LYRA.

As aggregate interest increased, key hedge funds have jumped into Lyra Therapeutics, Inc. (NASDAQ:LYRA) headfirst. Pura Vida Investments, managed by Efrem Kamen, assembled the biggest position in Lyra Therapeutics, Inc. (NASDAQ:LYRA). Pura Vida Investments had $4.4 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new LYRA investors: Michael Gelband’s ExodusPoint Capital, Ken Griffin’s Citadel Investment Group, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Lyra Therapeutics, Inc. (NASDAQ:LYRA) but similarly valued. We will take a look at Moleculin Biotech, Inc. (NASDAQ:MBRX), Mediwound Ltd (NASDAQ:MDWD), Educational Development Corporation (NASDAQ:EDUC), Aprea Therapeutics, Inc. (NASDAQ:APRE), iSun, Inc. (NASDAQ:ISUN), Citizens Holding Company (NASDAQ:CIZN), and Lifevantage Corporation (NASDAQ:LFVN). All of these stocks’ market caps are similar to LYRA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.1 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $39 million in LYRA’s case. Lifevantage Corporation (NASDAQ:LFVN) is the most popular stock in this table. On the other hand Educational Development Corporation (NASDAQ:EDUC) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Lyra Therapeutics, Inc. (NASDAQ:LYRA) is more popular among hedge funds. Our overall hedge fund sentiment score for LYRA is 90. 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 returned 25.7% in 2021 through September 27th but still managed to beat the market by 6.2 percentage points. Hedge funds were also right about betting on LYRA as the stock returned 15.8% since the end of June (through 9/27) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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