Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Blueprint Medicines Corporation (NASDAQ:BPMC) investors should pay attention to an increase in enthusiasm from smart money in recent months. Our calculations also showed that BPMC isn’t among the 30 most popular stocks among hedge funds.
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.
Let’s take a look at the key hedge fund action regarding Blueprint Medicines Corporation (NASDAQ:BPMC).
What have hedge funds been doing with Blueprint Medicines Corporation (NASDAQ:BPMC)?
At Q1’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 45% from the fourth quarter of 2018. On the other hand, there were a total of 27 hedge funds with a bullish position in BPMC a year ago. 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, Joseph Edelman’s Perceptive Advisors has the most valuable position in Blueprint Medicines Corporation (NASDAQ:BPMC), worth close to $101.7 million, corresponding to 2.9% of its total 13F portfolio. The second most bullish fund manager is Partner Fund Management, led by Christopher James, holding a $77.2 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Eli Casdin’s Casdin Capital, Andreas Halvorsen’s Viking Global and Mark Lampert’s Biotechnology Value Fund / BVF Inc.
Now, specific money managers were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, created the most outsized position in Blueprint Medicines Corporation (NASDAQ:BPMC). Laurion Capital Management had $21 million invested in the company at the end of the quarter. Ken Greenberg and David Kim’s Ghost Tree Capital also initiated a $19.2 million position during the quarter. The other funds with brand new BPMC positions are Eric Bannasch’s Cadian Capital, Anand Parekh’s Alyeska Investment Group, and D. E. Shaw’s D E Shaw.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Blueprint Medicines Corporation (NASDAQ:BPMC) but similarly valued. These stocks are Liberty Latin America Ltd. (NASDAQ:LILAK), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Associated Banc Corp (NYSE:ASB), and Hancock Whitney Corporation (NASDAQ:HWC). This group of stocks’ market values resemble BPMC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LILAK | 18 | 416954 | -1 |
| SBGI | 28 | 496817 | -5 |
| ASB | 16 | 216472 | -2 |
| HWC | 15 | 112402 | 0 |
| Average | 19.25 | 310661 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $632 million in BPMC’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Hancock Whitney Corporation (NASDAQ:HWC) is the least popular one with only 15 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 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 -2.3% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
