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Hedge Funds Keep Selling CymaBay Therapeutics Inc (CBAY)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of CymaBay Therapeutics Inc (NASDAQ:CBAY).

Is CymaBay Therapeutics Inc (NASDAQ:CBAY) an exceptional investment now? Investors who are in the know are in a bearish mood. The number of long hedge fund positions dropped by 5 recently. Our calculations also showed that CBAY 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). CBAY was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with CBAY positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Arnaud Ajdler Engine Capital

Arnaud Ajdler of Engine Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind we’re going to take a look at the latest hedge fund action encompassing CymaBay Therapeutics Inc (NASDAQ:CBAY).

What have hedge funds been doing with CymaBay Therapeutics Inc (NASDAQ:CBAY)?

At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the fourth quarter of 2019. On the other hand, there were a total of 29 hedge funds with a bullish position in CBAY a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Engine Capital was the largest shareholder of CymaBay Therapeutics Inc (NASDAQ:CBAY), with a stake worth $11.1 million reported as of the end of September. Trailing Engine Capital was Avoro Capital Advisors (venBio Select Advisor), which amassed a stake valued at $8.1 million. Redmile Group, Citadel Investment Group, and D E Shaw 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 Engine Capital allocated the biggest weight to CymaBay Therapeutics Inc (NASDAQ:CBAY), around 5.78% of its 13F portfolio. Avoro Capital Advisors (venBio Select Advisor) is also relatively very bullish on the stock, earmarking 0.27 percent of its 13F equity portfolio to CBAY.

Seeing as CymaBay Therapeutics Inc (NASDAQ:CBAY) has witnessed bearish sentiment from the smart money, it’s safe to say that there was a specific group of fund managers who were dropping their positions entirely by the end of the first quarter. Intriguingly, Jim Tananbaum’s Foresite Capital said goodbye to the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $2.9 million in stock, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners was right behind this move, as the fund said goodbye to about $1.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to CymaBay Therapeutics Inc (NASDAQ:CBAY). These stocks are Cidara Therapeutics Inc (NASDAQ:CDTX), SEACOR Marine Holdings Inc. (NYSE:SMHI), FIRST FINANCIAL NORTHWEST, INC. (NASDAQ:FFNW), and Adams Resources & Energy Inc (NYSE:AE). This group of stocks’ market valuations are similar to CBAY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CDTX 10 21826 1
SMHI 6 9532 0
FFNW 1 6754 0
AE 4 9723 -2
Average 5.25 11959 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $42 million in CBAY’s case. Cidara Therapeutics Inc (NASDAQ:CDTX) is the most popular stock in this table. On the other hand FIRST FINANCIAL NORTHWEST, INC. (NASDAQ:FFNW) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks CymaBay Therapeutics Inc (NASDAQ:CBAY) is more popular among hedge funds. 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 returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on CBAY as the stock returned 160.1% so far in Q2 (through June 25th) 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.