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 CymaBay Therapeutics Inc (NASDAQ:CBAY).
Is CBAY a good stock to buy now? Money managers were in a pessimistic mood. The number of bullish hedge fund bets retreated by 6 lately. CymaBay Therapeutics Inc (NASDAQ:CBAY) was in 18 hedge funds’ portfolios at the end of September. The all time high for this statistic is 29. Our calculations also showed that CBAY 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 the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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. Keeping this in mind we’re going to take a peek at the recent hedge fund action encompassing CymaBay Therapeutics Inc (NASDAQ:CBAY).
Do Hedge Funds Think CBAY Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CBAY over the last 21 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Avoro Capital Advisors (venBio Select Advisor), managed by Behzad Aghazadeh, holds the most valuable position in CymaBay Therapeutics Inc (NASDAQ:CBAY). Avoro Capital Advisors (venBio Select Advisor) has a $74.6 million position in the stock, comprising 1.1% of its 13F portfolio. On Avoro Capital Advisors (venBio Select Advisor)’s heels is Baker Bros. Advisors, managed by Julian Baker and Felix Baker, which holds a $23.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions comprise Ken Griffin’s Citadel Investment Group, Albert Cha and Frank Kung’s Vivo Capital and Jeremy Green’s Redmile Group. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to CymaBay Therapeutics Inc (NASDAQ:CBAY), around 8.85% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, setting aside 1.92 percent of its 13F equity portfolio to CBAY.
Because CymaBay Therapeutics Inc (NASDAQ:CBAY) has faced falling interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds that elected to cut their entire stakes in the third quarter. Interestingly, Neil Shahrestani’s Ikarian Capital dropped the biggest investment of the 750 funds watched by Insider Monkey, worth close to $5.3 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $3.6 million worth. These moves are interesting, as aggregate hedge fund interest fell by 6 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to CymaBay Therapeutics Inc (NASDAQ:CBAY). These stocks are Tredegar Corporation (NYSE:TG), The Bancorp, Inc. (NASDAQ:TBBK), FutureFuel Corp. (NYSE:FF), Varex Imaging Corporation (NASDAQ:VREX), Northern Dynasty Minerals Ltd. (NYSE:NAK), NOW Inc (NYSE:DNOW), and A10 Networks Inc (NYSE:ATEN). This group of stocks’ market caps are closest to CBAY’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $209 million in CBAY’s case. A10 Networks Inc (NYSE:ATEN) is the most popular stock in this table. On the other hand Northern Dynasty Minerals Ltd. (NYSE:NAK) is the least popular one with only 7 bullish hedge fund positions. CymaBay Therapeutics Inc (NASDAQ:CBAY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CBAY is 46.6. 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 positive signal but 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 December 14th and beat the market again by 15.8 percentage points. Unfortunately CBAY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CBAY were disappointed as the stock returned -0.7% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.