Were Hedge Funds Right About Dumping CytomX Therapeutics, Inc. (CTMX)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about CytomX Therapeutics, Inc. (NASDAQ:CTMX).

CytomX Therapeutics, Inc. (NASDAQ:CTMX) has seen a decrease in support from the world’s most elite money managers in recent months. CTMX was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 19 hedge funds in our database with CTMX holdings at the end of the previous quarter. Our calculations also showed that CTMX isn’t among the 30 most popular stocks among hedge funds.

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 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

We’re going to view the new hedge fund action encompassing CytomX Therapeutics, Inc. (NASDAQ:CTMX).

What does the smart money think about CytomX Therapeutics, Inc. (NASDAQ:CTMX)?

At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CTMX over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).


When looking at the institutional investors followed by Insider Monkey, Joseph Edelman’s Perceptive Advisors has the biggest position in CytomX Therapeutics, Inc. (NASDAQ:CTMX), worth close to $43.6 million, accounting for 1.7% of its total 13F portfolio. Coming in second is Point72 Asset Management, led by Steve Cohen, holding a $22.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions contain Jim Simons’s Renaissance Technologies, James E. Flynn’s Deerfield Management and Marc Schneidman’s Aquilo Capital Management.

Judging by the fact that CytomX Therapeutics, Inc. (NASDAQ:CTMX) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few money managers that decided to sell off their entire stakes by the end of the third quarter. Interestingly, Eli Casdin’s Casdin Capital dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $3.8 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $3 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to CytomX Therapeutics, Inc. (NASDAQ:CTMX). We will take a look at Nine Energy Service, Inc. (NYSE:NINE), SMART Global Holdings, Inc. (NASDAQ:SGH), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), and Seacor Holdings, Inc. (NYSE:CKH). This group of stocks’ market valuations match CTMX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NINE 10 38774 3
SGH 14 374016 2
AMEH 3 2024 -1
CKH 16 113538 -3
Average 10.75 132088 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $123 million in CTMX’s case. Seacor Holdings, Inc. (NYSE:CKH) is the most popular stock in this table. On the other hand Apollo Medical Holdings, Inc. (NASDAQ:AMEH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks CytomX Therapeutics, Inc. (NASDAQ:CTMX) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately CTMX wasn’t nearly as popular as these 15 stock and hedge funds that were betting on CTMX were disappointed as the stock returned -36.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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