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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards BioNTech SE (NASDAQ:BNTX).
Is BioNTech SE (NASDAQ:BNTX) undervalued? Money managers are becoming more confident. The number of long hedge fund positions improved by 4 lately. Our calculations also showed that BNTX 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). BNTX was in 4 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 0 hedge funds in our database with BNTX positions at the end of the previous quarter.
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 more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Kerr Neilson of Platinum Asset 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 view the new hedge fund action regarding BioNTech SE (NASDAQ:BNTX).
What does smart money think about BioNTech SE (NASDAQ:BNTX)?
Heading into the first quarter of 2020, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4 from the third quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in BNTX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Kerr Neilson’s Platinum Asset Management has the largest position in BioNTech SE (NASDAQ:BNTX), worth close to $14.2 million, corresponding to 0.3% of its total 13F portfolio. The second largest stake is held by Redmile Group, managed by Jeremy Green, which holds a $5.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism comprise Israel Englander’s Millennium Management, Benjamin A. Smith’s Laurion Capital Management and . In terms of the portfolio weights assigned to each position Platinum Asset Management allocated the biggest weight to BioNTech SE (NASDAQ:BNTX), around 0.28% of its 13F portfolio. Redmile Group is also relatively very bullish on the stock, earmarking 0.14 percent of its 13F equity portfolio to BNTX.
As one would reasonably expect, key hedge funds were breaking ground themselves. Platinum Asset Management, managed by Kerr Neilson, created the most valuable position in BioNTech SE (NASDAQ:BNTX). Platinum Asset Management had $14.2 million invested in the company at the end of the quarter. Jeremy Green’s Redmile Group also made a $5.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BioNTech SE (NASDAQ:BNTX) but similarly valued. These stocks are Erie Indemnity Company (NASDAQ:ERIE), Commerce Bancshares, Inc. (NASDAQ:CBSH), Qiagen NV (NYSE:QGEN), and Hill-Rom Holdings, Inc. (NYSE:HRC). This group of stocks’ market caps are closest to BNTX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ERIE | 20 | 92549 | 0 |
| CBSH | 10 | 43262 | 1 |
| QGEN | 51 | 585326 | 27 |
| HRC | 27 | 793647 | -2 |
| Average | 27 | 378696 | 6.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $379 million. That figure was $29 million in BNTX’s case. Qiagen NV (NYSE:QGEN) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks BioNTech SE (NASDAQ:BNTX) is even less popular than CBSH. Hedge funds clearly dropped the ball on BNTX as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on BNTX as the stock returned 18.1% during the same time period and outperformed the market by an even larger margin.
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.