While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Bio-Rad Laboratories, Inc. (NYSE:BIO) and see how the stock performed in comparison to hedge funds’ consensus picks.
Bio-Rad Laboratories, Inc. (NYSE:BIO) investors should pay attention to an increase in enthusiasm from smart money of late. Our calculations also showed that BIO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to view the key hedge fund action surrounding Bio-Rad Laboratories, Inc. (NYSE:BIO).
Hedge fund activity in Bio-Rad Laboratories, Inc. (NYSE:BIO)
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 38 hedge funds held shares or bullish call options in BIO a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in Bio-Rad Laboratories, Inc. (NYSE:BIO), which was worth $156.8 million at the end of the third quarter. On the second spot was Levin Easterly Partners which amassed $90.9 million worth of shares. Fisher Asset Management, Ariel Investments, and Polar Capital were 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 Tower House Partners allocated the biggest weight to Bio-Rad Laboratories, Inc. (NYSE:BIO), around 52.68% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, designating 9.97 percent of its 13F equity portfolio to BIO.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Miura Global Management, managed by Pasco Alfaro / Richard Tumure, created the most valuable position in Bio-Rad Laboratories, Inc. (NYSE:BIO). Miura Global Management had $25 million invested in the company at the end of the quarter. Joseph Edelman’s Perceptive Advisors also made a $21.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Principal Global Investors’s Columbus Circle Investors, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks similar to Bio-Rad Laboratories, Inc. (NYSE:BIO). These stocks are Marathon Oil Corporation (NYSE:MRO), Comerica Incorporated (NYSE:CMA), Teradyne, Inc. (NYSE:TER), and Datadog, Inc. (NASDAQ:DDOG). All of these stocks’ market caps resemble BIO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MRO | 35 | 394969 | 3 |
| CMA | 28 | 468164 | -4 |
| TER | 31 | 1128584 | 4 |
| DDOG | 39 | 208582 | 39 |
| Average | 33.25 | 550075 | 10.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $550 million. That figure was $1091 million in BIO’s case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand Comerica Incorporated (NYSE:CMA) is the least popular one with only 28 bullish hedge fund positions. Bio-Rad Laboratories, Inc. (NYSE:BIO) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on BIO as the stock returned 59.7% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
