Is Graybug Vision, Inc. (GRAY) A Good Stock To Buy?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Graybug Vision, Inc. (NASDAQ:GRAY).

Is Graybug Vision, Inc. (NASDAQ:GRAY) a great investment right now? Money managers were taking a pessimistic view. The number of long hedge fund bets were trimmed by 2 recently. Graybug Vision, Inc. (NASDAQ:GRAY) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 10. Our calculations also showed that GRAY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. 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 homepage. Now we’re going to go over the latest hedge fund action regarding Graybug Vision, Inc. (NASDAQ:GRAY).

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

At the end of March, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -40% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GRAY over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

More specifically, Deerfield Management was the largest shareholder of Graybug Vision, Inc. (NASDAQ:GRAY), with a stake worth $29.3 million reported as of the end of March. Trailing Deerfield Management was OrbiMed Advisors, which amassed a stake valued at $23.1 million. Laurion Capital Management was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Deerfield Management allocated the biggest weight to Graybug Vision, Inc. (NASDAQ:GRAY), around 0.62% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, designating 0.22 percent of its 13F equity portfolio to GRAY.

Due to the fact that Graybug Vision, Inc. (NASDAQ:GRAY) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few funds who were dropping their positions entirely heading into Q2. At the top of the heap, Anand Parekh’s Alyeska Investment Group said goodbye to the largest stake of all the hedgies followed by Insider Monkey, worth about $0.8 million in stock. Frank Fu’s fund, CaaS Capital, also dumped its stock, about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds heading into Q2.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Graybug Vision, Inc. (NASDAQ:GRAY) but similarly valued. These stocks are Moleculin Biotech, Inc. (NASDAQ:MBRX), La Jolla Pharmaceutical Company (NASDAQ:LJPC), Ohio Valley Banc Corp. (NASDAQ:OVBC), Capstone Turbine Corporation (NASDAQ:CPST), TransGlobe Energy Corporation (NASDAQ:TGA), Sachem Capital Corp. (NYSE:SACH), and Rhinebeck Bancorp, Inc. (NASDAQ:RBKB). This group of stocks’ market values are closest to GRAY’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.7 hedge funds with bullish positions and the average amount invested in these stocks was $10 million. That figure was $53 million in GRAY’s case. La Jolla Pharmaceutical Company (NASDAQ:LJPC) is the most popular stock in this table. On the other hand Ohio Valley Banc Corp. (NASDAQ:OVBC) is the least popular one with only 1 bullish hedge fund positions. Graybug Vision, Inc. (NASDAQ:GRAY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for GRAY is 24.5. 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 negative signal and 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately GRAY wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); GRAY investors were disappointed as the stock returned 5.8% since the end of March (through 6/11) 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 most of these stocks already outperformed the market in 2021.

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