At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Calithera Biosciences Inc (NASDAQ:CALA) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Calithera Biosciences Inc (NASDAQ:CALA) has seen a decrease in hedge fund interest of late. CALA was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with CALA holdings at the end of the previous quarter. Our calculations also showed that CALA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most shareholders, hedge funds are perceived as worthless, outdated investment vehicles of yesteryear. While there are more than 8000 funds in operation at the moment, We hone in on the aristocrats of this group, approximately 850 funds. These hedge fund managers command bulk of the hedge fund industry’s total asset base, and by watching their highest performing equity investments, Insider Monkey has revealed numerous investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Steven Cohen of Point72 Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the new hedge fund action surrounding Calithera Biosciences Inc (NASDAQ:CALA).
What does smart money think about Calithera Biosciences Inc (NASDAQ:CALA)?
Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in CALA over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Calithera Biosciences Inc (NASDAQ:CALA) was held by Biotechnology Value Fund / BVF Inc, which reported holding $42.4 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $18.8 million position. Other investors bullish on the company included Renaissance Technologies, Polar Capital, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Biotechnology Value Fund / BVF Inc allocated the biggest weight to Calithera Biosciences Inc (NASDAQ:CALA), around 3.96% of its 13F portfolio. Point72 Asset Management is also relatively very bullish on the stock, setting aside 0.15 percent of its 13F equity portfolio to CALA.
Since Calithera Biosciences Inc (NASDAQ:CALA) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few money managers that slashed their positions entirely in the first quarter. Interestingly, Phill Gross and Robert Atchinson’s Adage Capital Management dropped the largest stake of all the hedgies followed by Insider Monkey, valued at about $7.1 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $1.1 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds in the first quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Calithera Biosciences Inc (NASDAQ:CALA) but similarly valued. These stocks are Peoples Financial Services Corp. (NASDAQ:PFIS), Tidewater Inc. (NYSE:TDW), The Children’s Place Inc. (NASDAQ:PLCE), and Nantkwest Inc (NASDAQ:NK). This group of stocks’ market values are similar to CALA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFIS | 1 | 3174 | 0 |
| TDW | 8 | 56765 | -2 |
| PLCE | 18 | 93619 | -7 |
| NK | 4 | 6187 | -3 |
| Average | 7.75 | 39936 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $71 million in CALA’s case. The Children’s Place Inc. (NASDAQ:PLCE) is the most popular stock in this table. On the other hand Peoples Financial Services Corp. (NASDAQ:PFIS) is the least popular one with only 1 bullish hedge fund positions. Calithera Biosciences Inc (NASDAQ:CALA) 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 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately CALA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CALA were disappointed as the stock returned 18.9% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Calithera Biosciences Inc. (NASDAQ:CALA)
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Disclosure: None. This article was originally published at Insider Monkey.
