Is Catabasis Pharmaceuticals (CATB) A Good Stock To Buy Now?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Catabasis Pharmaceuticals Inc (NASDAQ:CATB).

Is Catabasis Pharmaceuticals (CATB) a good stock to buy now? CATB was in 6 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. CATB shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. There were 8 hedge funds in our database with CATB positions at the end of the second quarter. Our calculations also showed that CATB 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.

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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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. Now let’s check out the latest hedge fund action regarding Catabasis Pharmaceuticals Inc (NASDAQ:CATB).

What have hedge funds been doing with Catabasis Pharmaceuticals Inc (NASDAQ:CATB)?

Heading into the fourth quarter of 2020, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CATB over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Catabasis Pharmaceuticals Inc (NASDAQ:CATB) was held by Samsara BioCapital, which reported holding $1.9 million worth of stock at the end of September. It was followed by Parkman Healthcare Partners with a $0.9 million position. Other investors bullish on the company included Alyeska Investment Group, Winton Capital Management, and Ovata Capital Management. In terms of the portfolio weights assigned to each position Samsara BioCapital allocated the biggest weight to Catabasis Pharmaceuticals Inc (NASDAQ:CATB), around 0.52% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, designating 0.24 percent of its 13F equity portfolio to CATB.

Since Catabasis Pharmaceuticals Inc (NASDAQ:CATB) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of money managers that decided to sell off their positions entirely last quarter. Intriguingly, Renaissance Technologies cut the biggest stake of all the hedgies tracked by Insider Monkey, comprising an estimated $0.7 million in stock, and Efrem Kamen’s Pura Vida Investments was right behind this move, as the fund dumped about $0.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Catabasis Pharmaceuticals Inc (NASDAQ:CATB). These stocks are LEAP THERAPEUTICS, INC. (NASDAQ:LPTX), First Guaranty Bancshares, Inc. (NASDAQ:FGBI), Champions Oncology, Inc. (NASDAQ:CSBR), Laredo Petroleum Inc (NYSE:LPI), Genocea Biosciences Inc (NASDAQ:GNCA), Kopin Corporation (NASDAQ:KOPN), and Harvard Bioscience, Inc. (NASDAQ:HBIO). This group of stocks’ market valuations match CATB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LPTX 12 34432 -4
FGBI 1 328 -1
CSBR 2 2533 1
LPI 10 9238 -1
GNCA 10 28497 0
KOPN 2 2588 -1
HBIO 12 18011 0
Average 7 13661 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $3 million in CATB’s case. LEAP THERAPEUTICS, INC. (NASDAQ:LPTX) is the most popular stock in this table. On the other hand First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is the least popular one with only 1 bullish hedge fund positions. Catabasis Pharmaceuticals Inc (NASDAQ:CATB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CATB is 48.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately CATB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CATB investors were disappointed as the stock returned -74.3% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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