Is Cabaletta Bio (CABA) A Good Stock To Buy Now?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Cabaletta Bio, Inc. (NASDAQ:CABA).

Is Cabaletta Bio (CABA) a good stock to buy now? Money managers were cutting their exposure. The number of long hedge fund bets went down by 1 recently. Cabaletta Bio, Inc. (NASDAQ:CABA) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 9. Our calculations also showed that CABA isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

In today’s marketplace there are plenty of gauges investors use to value their stock investments. A couple of the less known gauges are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can trounce the broader indices by a superb margin (see the details here).

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s view the fresh hedge fund action encompassing Cabaletta Bio, Inc. (NASDAQ:CABA).

How are hedge funds trading Cabaletta Bio, Inc. (NASDAQ:CABA)?

At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CABA over the last 21 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in Cabaletta Bio, Inc. (NASDAQ:CABA) was held by Adage Capital Management, which reported holding $36.9 million worth of stock at the end of September. It was followed by Cormorant Asset Management with a $22.4 million position. Other investors bullish on the company included Redmile Group, Baker Bros. Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Cormorant Asset Management allocated the biggest weight to Cabaletta Bio, Inc. (NASDAQ:CABA), around 0.86% of its 13F portfolio. Redmile Group is also relatively very bullish on the stock, earmarking 0.28 percent of its 13F equity portfolio to CABA.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Renaissance Technologies. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified CABA as a viable investment and initiated a position in the stock.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cabaletta Bio, Inc. (NASDAQ:CABA) but similarly valued. We will take a look at NantHealth, Inc. (NASDAQ:NH), Northwest Pipe Company (NASDAQ:NWPX), Escalade, Inc. (NASDAQ:ESCA), InfuSystem Holdings, Inc. (NYSE:INFU), Invacare Corporation (NYSE:IVC), BBX Capital Corporation (NYSE:BBX), and CECO Environmental Corp. (NASDAQ:CECE). This group of stocks’ market caps are closest to CABA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NH 5 3004 2
NWPX 10 35388 -3
ESCA 9 16436 1
INFU 12 33703 6
IVC 17 60394 -1
BBX 9 17576 -2
CECE 10 48633 2
Average 10.3 30733 0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.3 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $93 million in CABA’s case. Invacare Corporation (NYSE:IVC) is the most popular stock in this table. On the other hand NantHealth, Inc. (NASDAQ:NH) is the least popular one with only 5 bullish hedge fund positions. Cabaletta Bio, Inc. (NASDAQ:CABA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CABA is 43.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on CABA as the stock returned 41.9% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.

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