How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Baudax Bio, Inc. (NASDAQ:BXRX).
Baudax Bio, Inc. (NASDAQ:BXRX) has experienced a decrease in hedge fund interest recently. Baudax Bio, Inc. (NASDAQ:BXRX) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 11. There were 9 hedge funds in our database with BXRX holdings at the end of December. Our calculations also showed that BXRX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s analyze the key hedge fund action regarding Baudax Bio, Inc. (NASDAQ:BXRX).
Do Hedge Funds Think BXRX Is A Good Stock To Buy Now?
At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -56% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BXRX over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Overdeck and David Siegel’s Two Sigma Advisors has the number one position in Baudax Bio, Inc. (NASDAQ:BXRX), worth close to $0.2 million, accounting for less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Neil Shahrestani’s Ikarian Capital, and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Ikarian Capital allocated the biggest weight to Baudax Bio, Inc. (NASDAQ:BXRX), around 0.0044% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0007 percent of its 13F equity portfolio to BXRX.
Seeing as Baudax Bio, Inc. (NASDAQ:BXRX) has witnessed bearish sentiment from the smart money, we can see that there exists a select few hedgies who sold off their entire stakes heading into Q2. It’s worth mentioning that Steven Boyd’s Armistice Capital dropped the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $3.5 million in stock. Renaissance Technologies, also said goodbye to its stock, about $0.4 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds heading into Q2.
Let’s now review hedge fund activity in other stocks similar to Baudax Bio, Inc. (NASDAQ:BXRX). We will take a look at ARC Document Solutions Inc (NYSE:ARC), Universal Stainless & Alloy Products (NASDAQ:USAP), Research Frontiers, Inc. (NASDAQ:REFR), Trinity Biotech plc (NASDAQ:TRIB), Pingtan Marine Enterprise Ltd. (NASDAQ:PME), PhenixFIN Corporation (NASDAQ:PFX), and U.S. Well Services, Inc. (NASDAQ:USWS). This group of stocks’ market values are closest to BXRX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ARC | 6 | 13716 | 0 |
| USAP | 6 | 15970 | 0 |
| REFR | 2 | 124 | 0 |
| TRIB | 5 | 7584 | 1 |
| PME | 2 | 596 | 1 |
| PFX | 2 | 1100 | 2 |
| USWS | 5 | 3720 | -2 |
| Average | 4 | 6116 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $1 million in BXRX’s case. ARC Document Solutions Inc (NYSE:ARC) is the most popular stock in this table. On the other hand Research Frontiers, Inc. (NASDAQ:REFR) is the least popular one with only 2 bullish hedge fund positions. Baudax Bio, Inc. (NASDAQ:BXRX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BXRX is 35.9. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately BXRX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BXRX investors were disappointed as the stock returned -34.5% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
