Here is What Hedge Funds Think About Pacific Biosciences of California (PACB)

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the 12-month period ending October 30. However, 63% of hedge funds’ top 30 stock picks from the index did beat the market, and returned nearly twice as much on average as the index. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Pacific Biosciences of California (NASDAQ:PACB) investors should pay attention to a decrease in hedge fund sentiment lately. PACB was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. There were 15 hedge funds in our database with PACB holdings at the end of the previous quarter. 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 Ameresco Inc (NYSE:AMRC), CTC Media, Inc. (NASDAQ:CTCM), and Heritage Oaks Bancorp (NASDAQ:HEOP) to gather more data points.

In the eyes of most market participants, hedge funds are viewed as unimportant, outdated investment tools of years past. While there are more than 8000 funds trading at the moment, We hone in on the top tier of this group, about 700 funds. These money managers have their hands on bulk of all hedge funds’ total asset base, and by watching their top picks, Insider Monkey has figured out several investment strategies that have historically defeated the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Keeping this in mind, we’re going to take a look at the recent action regarding Pacific Biosciences of California (NASDAQ:PACB).

Hedge fund activity in Pacific Biosciences of California (NASDAQ:PACB)

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from one quarter earlier. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lee Ainslie’s Maverick Capital has the most valuable position in Pacific Biosciences of California (NASDAQ:PACB), worth close to $27.3 million, corresponding to 0.5% of its total 13F portfolio. On Maverick Capital’s heels is Consonance Capital Management, managed by Mitchell Blutt, which holds an $22.9 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions encompass Israel Englander’s Millennium Management, James E. Flynn’s Deerfield Management and William C. Martin’s Raging Capital Management.

Judging by the fact that Pacific Biosciences of California (NASDAQ:PACB) has faced falling interest from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds who were dropping their positions entirely last quarter. Intriguingly, Jim Simons’s Renaissance Technologies dumped the largest stake of all the hedgies watched by Insider Monkey, valued at an estimated $1.8 million in stock. Stuart Weisbrod’s fund, Iguana Healthcare Management, also said goodbye to its stock, about $1.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Pacific Biosciences of California (NASDAQ:PACB). These stocks are Ameresco Inc (NYSE:AMRC), CTC Media, Inc. (NASDAQ:CTCM), Heritage Oaks Bancorp (NASDAQ:HEOP), and Northern Oil & Gas, Inc. (NYSEMKT:NOG). This group of stocks’ market valuations are closest to PACB’s market valuation.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $76 million in PACB’s case. Northern Oil & Gas, Inc. (NYSEMKT:NOG) is the most popular stock in this table, whereas Heritage Oaks Bancorp (NASDAQ:HEOP) is the least popular one. In comparison, Pacific Biosciences of California (NASDAQ:PACB), with 11 bullish hedge fund positions is more popular among hedge funds. This may imply it is a good buying opportunity. Therefore, it may be a good idea to analyze it in detail and potentially include it in your portfolio.