We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Bio-Rad Laboratories, Inc. (NYSE:BIO).
Bio-Rad Laboratories, Inc. (NYSE:BIO) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 44 hedge funds’ portfolios at the end of December. 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 Tractor Supply Company (NASDAQ:TSCO), StoneCo Ltd. (NASDAQ:STNE), and Elanco Animal Health Incorporated (NYSE:ELAN) to gather more data points. Our calculations also showed that BIO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 S&P 500 ETFs by 41 percentage points since March 2017 (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.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action surrounding Bio-Rad Laboratories, Inc. (NYSE:BIO).
Hedge fund activity in Bio-Rad Laboratories, Inc. (NYSE:BIO)
At Q4’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BIO over the last 18 quarters. So, let’s check out 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, Cliff Asness’s AQR Capital Management has the number one position in Bio-Rad Laboratories, Inc. (NYSE:BIO), worth close to $118.4 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $99.5 million position; 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include John W. Rogers’s Ariel Investments, Ken Fisher’s Fisher Asset Management and Barry Dargan’s Intermede Investment Partners. 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 43.05% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, setting aside 8.38 percent of its 13F equity portfolio to BIO.
Due to the fact that Bio-Rad Laboratories, Inc. (NYSE:BIO) has witnessed bearish sentiment from the smart money, it’s easy to see that there exists a select few funds who sold off their entire stakes last quarter. It’s worth mentioning that Michael Gelband’s ExodusPoint Capital dumped the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $11.8 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also said goodbye to its stock, about $11.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Bio-Rad Laboratories, Inc. (NYSE:BIO). We will take a look at Tractor Supply Company (NASDAQ:TSCO), StoneCo Ltd. (NASDAQ:STNE), Elanco Animal Health Incorporated (NYSE:ELAN), and LKQ Corporation (NASDAQ:LKQ). This group of stocks’ market valuations match BIO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TSCO | 44 | 696994 | 3 |
| STNE | 29 | 1474730 | 1 |
| ELAN | 23 | 620585 | -4 |
| LKQ | 52 | 1559414 | 9 |
| Average | 37 | 1087931 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1088 million. That figure was $1031 million in BIO’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Elanco Animal Health Incorporated (NYSE:ELAN) is the least popular one with only 23 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on BIO as the stock returned -9.3% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
