We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Cyclerion Therapeutics, Inc. (NASDAQ:CYCN).
Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) was in 6 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 17. Our calculations also showed that CYCN 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In the eyes of most traders, hedge funds are seen as underperforming, outdated financial vehicles of the past. While there are over 8000 funds in operation today, Our researchers choose to focus on the bigwigs of this club, around 850 funds. These hedge fund managers handle the majority of the hedge fund industry's total asset base, and by tailing their highest performing equity investments, Insider Monkey has unsheathed various investment strategies that have historically defeated the market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Oleg Nodelman of EcoR1 Capital
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. Keeping this in mind we're going to take a look at the new hedge fund action encompassing Cyclerion Therapeutics, Inc. (NASDAQ:CYCN).
How have hedgies been trading Cyclerion Therapeutics, Inc. (NASDAQ:CYCN)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -45% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in CYCN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) was held by Slate Path Capital, which reported holding $37.7 million worth of stock at the end of September. It was followed by EcoR1 Capital with a $16.7 million position. Other investors bullish on the company included MFN Partners, D E Shaw, and PDT Partners. In terms of the portfolio weights assigned to each position Slate Path Capital allocated the biggest weight to Cyclerion Therapeutics, Inc. (NASDAQ:CYCN), around 2.14% of its 13F portfolio. MFN Partners is also relatively very bullish on the stock, dishing out 1.21 percent of its 13F equity portfolio to CYCN.
Because Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedgies that slashed their full holdings last quarter. Intriguingly, Kamran Moghtaderi's Eversept Partners dropped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $1.5 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $0.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 5 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) but similarly valued. We will take a look at Genasys Inc. (NASDAQ:GNSS), Venator Materials PLC (NYSE:VNTR), Caledonia Mining Corporation Plc (NYSE:CMCL), Lifetime Brands Inc (NASDAQ:LCUT), Gamida Cell Ltd. (NASDAQ:GMDA), Verastem Inc (NASDAQ:VSTM), and Mastech Digital, Inc. (NYSE:MHH). This group of stocks' market caps are similar to CYCN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GNSS,5,20993,0 VNTR,10,20533,1 CMCL,4,4812,1 LCUT,5,2117,3 GMDA,10,31096,1 VSTM,11,34590,-7 MHH,4,4989,1 Average,7,17019,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $17 million. That figure was $70 million in CYCN's case. Verastem Inc (NASDAQ:VSTM) is the most popular stock in this table. On the other hand Caledonia Mining Corporation Plc (NYSE:CMCL) is the least popular one with only 4 bullish hedge fund positions. Cyclerion Therapeutics, Inc. (NASDAQ:CYCN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CYCN is 24.9. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately CYCN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CYCN investors were disappointed as the stock returned -46.4% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.