Do Hedge Funds Love Baxalta Inc (BXLT)?

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

Baxalta Inc (NYSE:BXLT) investors should pay attention to an increase in hedge fund interest in recent months. Baxalta Inc (NYSE:BXLT) was in 39 hedge funds’ portfolios at the end of the third quarter of 2015. There were 4 hedge funds in our database with Baxalta Inc (NYSE:BXLT) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Public Service Enterprise Group Inc. (NYSE:PEG), Ryanair Holdings plc (ADR) (NASDAQ:RYAAY), and Southern Copper Corp (NYSE:SCCO) to gather more data points.

If you’d ask most market participants, hedge funds are assumed to be slow, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, our experts look at the masters of this club, about 700 funds. These hedge fund managers control the lion’s share of the hedge fund industry’s total capital, and by following their matchless equity investments, Insider Monkey has deciphered a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s take a look at the new action surrounding Baxalta Inc (NYSE:BXLT).

How are hedge funds trading Baxalta Inc (NYSE:BXLT)?

Heading into Q4, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 875% from the second quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the most valuable position in Baxalta Inc (NYSE:BXLT). Pzena Investment Management has a $129 million position in the stock, comprising 0.8% of its 13F portfolio. The second largest stake is held by D E Shaw holding an $68.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism contain Malcolm Fairbairn’s Ascend Capital, Zach Schreiber’s Point State Capital, and GLG Partners.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. The other funds with brand new Baxalta Inc (NYSE:BXLT) positions are Point State Capital, GLG Partners, and Phill Gross and Robert Atchinson’s Adage Capital Management.

Let’s check out hedge fund activity in other stocks similar to Baxalta Inc (NYSE:BXLT). These stocks are Public Service Enterprise Group Inc. (NYSE:PEG), Ryanair Holdings plc (ADR) (NASDAQ:RYAAY), Southern Copper Corp (NYSE:SCCO), and Canadian Natural Resource Ltd (USA) (NYSE:CNQ). This group of stocks’ market valuations is similar to Baxalta Inc (NYSE:BXLT)’s market valuation.

As you can see, these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $508 million. That figure was $717 million in Baxalta Inc (NYSE:BXLT)’s case. Canadian Natural Resource Ltd (USA) (NYSE:CNQ) is the most popular stock in this table. On the other hand, Southern Copper Corp (NYSE:SCCO) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks, Baxalta Inc (NYSE:BXLT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.