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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Blueprint Medicines Corporation (NASDAQ:BPMC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Blueprint Medicines Corporation (NASDAQ:BPMC) has seen an increase in hedge fund interest in recent months. BPMC was in 37 hedge funds’ portfolios at the end of December. There were 27 hedge funds in our database with BPMC positions at the end of the previous quarter. Our calculations also showed that BPMC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are a large number of gauges shareholders use to grade publicly traded companies. A duo of the most innovative gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best fund managers can outclass the market by a significant margin (see the details here).
Lei Zhang of Hillhouse 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. Now let’s take a look at the new hedge fund action regarding Blueprint Medicines Corporation (NASDAQ:BPMC).
How have hedgies been trading Blueprint Medicines Corporation (NASDAQ:BPMC)?
At Q4’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 37% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in BPMC over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Eric Bannasch’s Cadian Capital has the most valuable position in Blueprint Medicines Corporation (NASDAQ:BPMC), worth close to $157.7 million, corresponding to 7% of its total 13F portfolio. The second largest stake is held by Hillhouse Capital Management, led by Lei Zhang, holding a $120.5 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions contain Andreas Halvorsen’s Viking Global, Eli Casdin’s Casdin Capital and Joseph Edelman’s Perceptive Advisors. In terms of the portfolio weights assigned to each position Cadian Capital allocated the biggest weight to Blueprint Medicines Corporation (NASDAQ:BPMC), around 6.96% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, earmarking 6.92 percent of its 13F equity portfolio to BPMC.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, created the most outsized position in Blueprint Medicines Corporation (NASDAQ:BPMC). Point72 Asset Management had $16.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $4.8 million position during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, and Anand Parekh’s Alyeska Investment Group.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Blueprint Medicines Corporation (NASDAQ:BPMC) but similarly valued. We will take a look at CarGurus, Inc. (NASDAQ:CARG), HUYA Inc. (NYSE:HUYA), United Bankshares, Inc. (NASDAQ:UBSI), and Bank OZK (NASDAQ:OZK). This group of stocks’ market values match BPMC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CARG | 33 | 936090 | 11 |
| HUYA | 21 | 305224 | -1 |
| UBSI | 18 | 51802 | 7 |
| OZK | 25 | 276283 | 4 |
| Average | 24.25 | 392350 | 5.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $392 million. That figure was $787 million in BPMC’s case. CarGurus, Inc. (NASDAQ:CARG) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Blueprint Medicines Corporation (NASDAQ:BPMC) is more popular among hedge funds. 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 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately BPMC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BPMC were disappointed as the stock returned -28% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
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.
