Hedge Funds Aren’t Crazy About Avid Bioservices, Inc. (CDMO) Anymore

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Avid Bioservices, Inc. (NASDAQ:CDMO) based on those filings.

Avid Bioservices, Inc. (NASDAQ:CDMO) has experienced a decrease in hedge fund interest of late. Avid Bioservices, Inc. (NASDAQ:CDMO) was in 21 hedge funds’ portfolios at the end of March. The all time high for this statistic is 25. There were 25 hedge funds in our database with CDMO positions at the end of the fourth quarter. Our calculations also showed that CDMO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s analyze the latest hedge fund action encompassing Avid Bioservices, Inc. (NASDAQ:CDMO).

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

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -16% from the fourth quarter of 2020. By comparison, 11 hedge funds held shares or bullish call options in CDMO a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Is CDMO A Good Stock To Buy?

More specifically, Iszo Capital was the largest shareholder of Avid Bioservices, Inc. (NASDAQ:CDMO), with a stake worth $42.8 million reported as of the end of March. Trailing Iszo Capital was AltraVue Capital, which amassed a stake valued at $25.6 million. Parkman Healthcare Partners, Driehaus Capital, and Portolan Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Iszo Capital allocated the biggest weight to Avid Bioservices, Inc. (NASDAQ:CDMO), around 20.16% of its 13F portfolio. AltraVue Capital is also relatively very bullish on the stock, setting aside 10.88 percent of its 13F equity portfolio to CDMO.

Because Avid Bioservices, Inc. (NASDAQ:CDMO) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that slashed their positions entirely in the first quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dumped the biggest position of the 750 funds monitored by Insider Monkey, worth about $1 million in stock, and Roger Ibbotson’s Zebra Capital Management was right behind this move, as the fund said goodbye to about $1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks similar to Avid Bioservices, Inc. (NASDAQ:CDMO). We will take a look at NOW Inc (NYSE:DNOW), Community Healthcare Trust Inc (NYSE:CHCT), Brooge Energy Limited (NASDAQ:BROG), Colony Credit Real Estate, Inc. (NYSE:CLNC), Diebold Nixdorf Incorporated (NYSE:DBD), Prothena Corporation plc (NASDAQ:PRTA), and Trillium Therapeutics Inc. (NASDAQ:TRIL). All of these stocks’ market caps are similar to CDMO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DNOW 18 117523 -4
CHCT 14 81537 2
BROG 6 40875 0
CLNC 8 58730 -2
DBD 19 183518 1
PRTA 17 450354 -3
TRIL 27 343747 -9
Average 15.6 182326 -2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.6 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $141 million in CDMO’s case. Trillium Therapeutics Inc. (NASDAQ:TRIL) is the most popular stock in this table. On the other hand Brooge Energy Limited (NASDAQ:BROG) is the least popular one with only 6 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 61.9. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on CDMO as the stock returned 37.7% since the end of Q1 (through 7/16) 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.