Is Cytokinetics, Inc. (CYTK) Going to Burn These Hedge Funds?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Cytokinetics, Inc. (NASDAQ:CYTK) changed recently.

Cytokinetics, Inc. (NASDAQ:CYTK) was in 25 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 31. CYTK investors should pay attention to a decrease in hedge fund sentiment recently. There were 31 hedge funds in our database with CYTK positions at the end of the second quarter. Our calculations also showed that CYTK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s take a look at the fresh hedge fund action encompassing Cytokinetics, Inc. (NASDAQ:CYTK).

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

At third quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CYTK over the last 25 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Christopher James’s Partner Fund Management has the number one position in Cytokinetics, Inc. (NASDAQ:CYTK), worth close to $112.9 million, corresponding to 3.3% of its total 13F portfolio. The second most bullish fund manager is Polar Capital, led by Brian Ashford-Russell and Tim Woolley, holding a $107.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Richard Driehaus’s Driehaus Capital, Farallon Capital and James E. Flynn’s Deerfield Management. In terms of the portfolio weights assigned to each position Commodore Capital allocated the biggest weight to Cytokinetics, Inc. (NASDAQ:CYTK), around 7.51% of its 13F portfolio. Opaleye Management is also relatively very bullish on the stock, setting aside 3.87 percent of its 13F equity portfolio to CYTK.

Seeing as Cytokinetics, Inc. (NASDAQ:CYTK) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the largest stake of the 750 funds watched by Insider Monkey, worth about $14.1 million in stock, and Albert Cha and Frank Kung’s Vivo Capital was right behind this move, as the fund dumped about $13.9 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 6 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Cytokinetics, Inc. (NASDAQ:CYTK). We will take a look at ALX Oncology Holdings Inc. (NASDAQ:ALXO), Rackspace Technology, Inc. (NASDAQ:RXT), Digitalbridge Group Inc (NYSE:DBRG), Turquoise Hill Resources Ltd (NYSE:TRQ), Helmerich & Payne, Inc. (NYSE:HP), NorthWestern Corporation (NASDAQ:NWE), and Hecla Mining Company (NYSE:HL). This group of stocks’ market valuations are similar to CYTK’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $765 million in CYTK’s case. Digitalbridge Group Inc (NYSE:DBRG) is the most popular stock in this table. On the other hand Turquoise Hill Resources Ltd (NYSE:TRQ) is the least popular one with only 10 bullish hedge fund positions. Cytokinetics, Inc. (NASDAQ:CYTK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CYTK is 58.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately CYTK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CYTK were disappointed as the stock returned -2% since the end of September (through 12/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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