Is CytomX Therapeutics, Inc. (CTMX) A Good Stock To Buy?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

CytomX Therapeutics, Inc. (NASDAQ:CTMX) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds’ portfolios at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Forrester Research, Inc. (NASDAQ:FORR), Harmony Gold Mining Co. (NYSE:HMY), and SP Plus Corp (NASDAQ:SP) to gather more data points.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

Let’s analyze the fresh hedge fund action surrounding CytomX Therapeutics, Inc. (NASDAQ:CTMX).

What have hedge funds been doing with CytomX Therapeutics, Inc. (NASDAQ:CTMX)?

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, representing no change from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CTMX over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CTMX Positions

More specifically, Perceptive Advisors was the largest shareholder of CytomX Therapeutics, Inc. (NASDAQ:CTMX), with a stake worth $49.2 million reported as of the end of September. Trailing Perceptive Advisors was Renaissance Technologies, which amassed a stake valued at $28.1 million. Point72 Asset Management, Deerfield Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Since CytomX Therapeutics, Inc. (NASDAQ:CTMX) has witnessed declining sentiment from the smart money, it’s safe to say that there was a specific group of funds that slashed their entire stakes last quarter. Interestingly, Jason Karp’s Tourbillon Capital Partners dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, worth about $6.9 million in stock, and Jeremy Green’s Redmile Group was right behind this move, as the fund dumped about $6 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to CytomX Therapeutics, Inc. (NASDAQ:CTMX). We will take a look at Forrester Research, Inc. (NASDAQ:FORR), Harmony Gold Mining Company Limited (HMY) (NYSE:HMY), SP Plus Corp (NASDAQ:SP), and Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX). All of these stocks’ market caps are similar to CTMX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FORR 9 52008 0
HMY 7 8354 -1
SP 12 112782 1
BLX 1 5036 0
Average 7.25 44545 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $145 million in CTMX’s case. SP Plus Corp (NASDAQ:SP) is the most popular stock in this table. On the other hand Banco Latinoamericano de Comercio Exterior, S.A. (NYSE:BLX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks CytomX Therapeutics, Inc. (NASDAQ:CTMX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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