Is CBIO A Good Stock To Buy Now?

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Catalyst Biosciences Inc (NASDAQ:CBIO).

Is CBIO a good stock to buy now? Investors who are in the know were getting less optimistic. The number of bullish hedge fund bets dropped by 2 in recent months. Catalyst Biosciences Inc (NASDAQ:CBIO) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. Our calculations also showed that CBIO 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). There were 18 hedge funds in our database with CBIO positions at the end of the second 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 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.

Tim Lynch of Stonepine Capital

Timothy Lynch of Stonepine 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. Now let’s take a glance at the key hedge fund action regarding Catalyst Biosciences Inc (NASDAQ:CBIO).

Do Hedge Funds Think CBIO Is A Good Stock To Buy Now?

At the end of September, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CBIO over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management has the biggest position in Catalyst Biosciences Inc (NASDAQ:CBIO), worth close to $7.8 million, accounting for 0.2% of its total 13F portfolio. The second most bullish fund manager is Acuta Capital Partners, managed by Manfred Yu, which holds a $6.4 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Timothy P. Lynch’s Stonepine Capital, Israel Englander’s Millennium Management and Lawrence Hawkins’s Prosight Capital. In terms of the portfolio weights assigned to each position Stonepine Capital allocated the biggest weight to Catalyst Biosciences Inc (NASDAQ:CBIO), around 6.31% of its 13F portfolio. Acuta Capital Partners is also relatively very bullish on the stock, earmarking 1.75 percent of its 13F equity portfolio to CBIO.

Judging by the fact that Catalyst Biosciences Inc (NASDAQ:CBIO) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of money managers who were dropping their full holdings in the third quarter. Intriguingly, Anand Parekh’s Alyeska Investment Group said goodbye to the largest position of all the hedgies tracked by Insider Monkey, valued at about $1.3 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund said goodbye to about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Catalyst Biosciences Inc (NASDAQ:CBIO) but similarly valued. We will take a look at Marchex, Inc. (NASDAQ:MCHX), Greenlane Holdings, Inc. (NASDAQ:GNLN), On Deck Capital Inc (NYSE:ONDK), Oak Valley Bancorp (NASDAQ:OVLY), Westwood Holdings Group, Inc. (NYSE:WHG), Bionano Genomics, Inc. (NASDAQ:BNGO), and Pareteum Corporation (NASDAQ:TEUM). All of these stocks’ market caps are closest to CBIO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCHX 10 21483 -2
GNLN 4 2272 0
ONDK 13 24345 -3
OVLY 1 161 0
WHG 7 16823 -1
BNGO 2 202 -1
TEUM 4 465 -3
Average 5.9 9393 -1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.9 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $31 million in CBIO’s case. On Deck Capital Inc (NYSE:ONDK) is the most popular stock in this table. On the other hand Oak Valley Bancorp (NASDAQ:OVLY) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Catalyst Biosciences Inc (NASDAQ:CBIO) is more popular among hedge funds. Our overall hedge fund sentiment score for CBIO is 79.7. 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 returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on CBIO as the stock returned 69.5% since the end of September (through 12/14) 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.