Is CDMO A Good Stock To Buy Now?

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of Avid Bioservices, Inc. (NASDAQ:CDMO) based on that data.

Is CDMO a good stock to buy now? Avid Bioservices, Inc. (NASDAQ:CDMO) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. Avid Bioservices, Inc. (NASDAQ:CDMO) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that CDMO 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.

Chuck Royce

Chuck Royce of Royce & AssociatesChuck Royce

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 go over the new hedge fund action regarding Avid Bioservices, Inc. (NASDAQ:CDMO).

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

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CDMO over the last 21 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is CDMO A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the largest position in Avid Bioservices, Inc. (NASDAQ:CDMO), worth close to $20.4 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Touk Sinantha of AltraVue Capital, with a $15 million position; the fund has 8.8% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain George McCabe’s Portolan Capital Management, Greg Martinez’s Parkman Healthcare Partners and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position AltraVue Capital allocated the biggest weight to Avid Bioservices, Inc. (NASDAQ:CDMO), around 8.82% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, designating 0.98 percent of its 13F equity portfolio to CDMO.

Now, some big names were breaking ground themselves. Zebra Capital Management, managed by Roger Ibbotson, created the largest position in Avid Bioservices, Inc. (NASDAQ:CDMO). Zebra Capital Management had $0.6 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also made a $0.5 million investment in the stock during the quarter. The other funds with brand new CDMO positions are Noam Gottesman’s GLG Partners, Greg Eisner’s Engineers Gate Manager, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s now review hedge fund activity in other stocks similar to Avid Bioservices, Inc. (NASDAQ:CDMO). These stocks are Napco Security Technologies Inc (NASDAQ:NSSC), MannKind Corporation (NASDAQ:MNKD), First Financial Corp (NASDAQ:THFF), Global Cord Blood Corp (NYSE:CO), TherapeuticsMD Inc (NASDAQ:TXMD), Harpoon Therapeutics, Inc. (NASDAQ:HARP), and Alphatec Holdings Inc (NASDAQ:ATEC). This group of stocks’ market values match CDMO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NSSC 2 1228 -6
MNKD 7 5789 -6
THFF 10 23201 2
CO 8 23946 -3
TXMD 11 36272 1
HARP 12 59522 1
ATEC 13 42822 1
Average 9 27540 -1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $52 million in CDMO’s case. Alphatec Holdings Inc (NASDAQ:ATEC) is the most popular stock in this table. On the other hand Napco Security Technologies Inc (NASDAQ:NSSC) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Avid Bioservices, Inc. (NASDAQ:CDMO) is more popular among hedge funds. Our overall hedge fund sentiment score for CDMO is 84.2. 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 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 CDMO as the stock returned 40.7% 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.