Hedge Funds Have Never Been More Bullish On Zymeworks Inc. (ZYME)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Zymeworks Inc. (NYSE:ZYME).

Hedge fund interest in Zymeworks Inc. (NYSE:ZYME) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare ZYME to other stocks including CIRCOR International, Inc. (NYSE:CIR), Navigant Consulting, Inc. (NYSE:NCI), and California Resources Corporation (NYSE:CRC) to get a better sense of its popularity. Our calculations also showed that ZYME isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are tons of indicators stock market investors employ to evaluate their stock investments. A pair of the most useful indicators are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top money managers can beat the market by a superb amount (see the details here).

Felix Baker - Baker Bros.

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action encompassing Zymeworks Inc. (NYSE:ZYME).

What does smart money think about Zymeworks Inc. (NYSE:ZYME)?

At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ZYME over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ZYME Positions

Of the funds tracked by Insider Monkey, Camber Capital Management, managed by Stephen DuBois, holds the largest position in Zymeworks Inc. (NYSE:ZYME). Camber Capital Management has a $57.2 million position in the stock, comprising 2.7% of its 13F portfolio. The second most bullish fund manager is Perceptive Advisors, led by Joseph Edelman, holding a $52.1 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Farallon Capital, Julian Baker and Felix Baker’s Baker Bros. Advisors and Albert Cha and Frank Kung’s Vivo Capital.

Since Zymeworks Inc. (NYSE:ZYME) has experienced declining sentiment from hedge fund managers, logic holds that there is a sect of money managers that decided to sell off their positions entirely by the end of the second quarter. Intriguingly, David Rosen’s Rubric Capital Management sold off the largest position of the 750 funds watched by Insider Monkey, comprising about $2.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $2.2 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Zymeworks Inc. (NYSE:ZYME) but similarly valued. We will take a look at CIRCOR International, Inc. (NYSE:CIR), Navigant Consulting, Inc. (NYSE:NCI), California Resources Corporation (NYSE:CRC), and PC Connection, Inc. (NASDAQ:CNXN). All of these stocks’ market caps are closest to ZYME’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CIR 10 175397 3
NCI 11 52264 -4
CRC 12 115705 -3
CNXN 8 38391 0
Average 10.25 95439 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $297 million in ZYME’s case. California Resources Corporation (NYSE:CRC) is the most popular stock in this table. On the other hand PC Connection, Inc. (NASDAQ:CNXN) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Zymeworks Inc. (NYSE:ZYME) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on ZYME as the stock returned 12.7% during Q3 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.

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