“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) an exceptional investment today? The smart money is taking a pessimistic view. The number of bullish hedge fund bets were cut by 5 lately. Our calculations also showed that BCRX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the fresh hedge fund action surrounding BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX).
What does smart money think about BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX)?
At the end of the second quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in BCRX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Baker Bros. Advisors held the most valuable stake in BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), which was worth $54.5 million at the end of the second quarter. On the second spot was Millennium Management which amassed $26.9 million worth of shares. Moreover, Deerfield Management, Citadel Investment Group, and Ghost Tree Capital were also bullish on BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), allocating a large percentage of their portfolios to this stock.
Judging by the fact that BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of money managers that elected to cut their positions entirely last quarter. At the top of the heap, Peter Kolchinsky’s RA Capital Management dropped the largest position of the 750 funds tracked by Insider Monkey, totaling about $70.5 million in stock. Jeffrey Jay and David Kroin’s fund, Great Point Partners, also said goodbye to its stock, about $48.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX). We will take a look at Fidus Investment Corporation (NASDAQ:FDUS), PhaseBio Pharmaceuticals, Inc. (NASDAQ:PHAS), Golden Entertainment Inc (NASDAQ:GDEN), and Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX). This group of stocks’ market caps are similar to BCRX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FDUS | 5 | 11178 | -3 |
| PHAS | 8 | 58573 | 4 |
| GDEN | 11 | 79189 | -1 |
| ELOX | 2 | 3954 | 2 |
| Average | 6.5 | 38224 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $141 million in BCRX’s case. Golden Entertainment Inc (NASDAQ:GDEN) is the most popular stock in this table. On the other hand Eloxx Pharmaceuticals, Inc. (NASDAQ:ELOX) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BCRX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BCRX were disappointed as the stock returned -24.3% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.
