At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards BELLUS Health Inc. (NASDAQ:BLU).
BELLUS Health Inc. (NASDAQ:BLU) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 17. BLU investors should pay attention to a decrease in enthusiasm from smart money in recent months. There were 17 hedge funds in our database with BLU positions at the end of the second quarter. Our calculations also showed that BLU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let’s take a peek at the latest hedge fund action regarding BELLUS Health Inc. (NASDAQ:BLU).
How are hedge funds trading BELLUS Health Inc. (NASDAQ:BLU)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -53% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in BLU a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in BELLUS Health Inc. (NASDAQ:BLU) was held by OrbiMed Advisors, which reported holding $11.7 million worth of stock at the end of September. It was followed by Polar Capital with a $6.8 million position. Other investors bullish on the company included Frazier Healthcare Partners, Citadel Investment Group, and Sabby Capital. In terms of the portfolio weights assigned to each position Sabby Capital allocated the biggest weight to BELLUS Health Inc. (NASDAQ:BLU), around 0.3% of its 13F portfolio. Frazier Healthcare Partners is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to BLU.
Seeing as BELLUS Health Inc. (NASDAQ:BLU) has witnessed falling interest from the smart money, it’s safe to say that there was a specific group of money managers that decided to sell off their full holdings by the end of the third quarter. Interestingly, Mitchell Blutt’s Consonance Capital Management cut the largest position of all the hedgies watched by Insider Monkey, worth an estimated $19.8 million in stock, and Joseph Edelman’s Perceptive Advisors was right behind this move, as the fund dropped about $11.6 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 9 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BELLUS Health Inc. (NASDAQ:BLU) but similarly valued. These stocks are Exagen Inc. (NASDAQ:XGN), Bassett Furniture Industries Inc. (NASDAQ:BSET), BCB Bancorp, Inc. (NASDAQ:BCBP), Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA), Lantronix Inc (NASDAQ:LTRX), Ocean Bio-Chem, Inc. (NASDAQ:OBCI), and XpresSpa Group, Inc. (NASDAQ:XSPA). This group of stocks’ market valuations are closest to BLU’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XGN | 1 | 1 | 0 |
| BSET | 5 | 23360 | -4 |
| BCBP | 3 | 12669 | -1 |
| IEA | 7 | 16703 | 0 |
| LTRX | 4 | 5861 | 0 |
| OBCI | 2 | 4284 | 1 |
| XSPA | 3 | 2502 | 0 |
| Average | 3.6 | 9340 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.6 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $27 million in BLU’s case. Infrastructure and Energy Alternatives, Inc. (NASDAQ:IEA) is the most popular stock in this table. On the other hand Exagen Inc. (NASDAQ:XGN) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks BELLUS Health Inc. (NASDAQ:BLU) is more popular among hedge funds. Our overall hedge fund sentiment score for BLU is 60.1. 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. 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 percentage points. These stocks returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on BLU as the stock returned 35.7% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
