The market has been volatile in the last 6 months as the Federal Reserve continued its rate hikes and then abruptly reversed its stance and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 9 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q4 and the beginning of Q1. In this article, we analyze what the smart money thinks of BioDelivery Sciences International, Inc. (NASDAQ:BDSI) and find out how it is affected by hedge funds’ moves.
BioDelivery Sciences International, Inc. (NASDAQ:BDSI) was in 18 hedge funds’ portfolios at the end of March. BDSI investors should pay attention to an increase in hedge fund sentiment recently. There were 15 hedge funds in our database with BDSI holdings at the end of the previous quarter. Our calculations also showed that BDSI 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.
We’re going to take a gander at the key hedge fund action regarding BioDelivery Sciences International, Inc. (NASDAQ:BDSI).
Hedge fund activity in BioDelivery Sciences International, Inc. (NASDAQ:BDSI)
At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the fourth quarter of 2018. On the other hand, there were a total of 14 hedge funds with a bullish position in BDSI 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, venBio Select Advisor, managed by Behzad Aghazadeh, holds the number one position in BioDelivery Sciences International, Inc. (NASDAQ:BDSI). venBio Select Advisor has a $39.4 million position in the stock, comprising 1.7% of its 13F portfolio. The second largest stake is held by Broadfin Capital, led by Kevin Kotler, holding a $23.2 million position; 4.8% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism comprise Wilmot B. Harkey and Daniel Mack’s Nantahala Capital Management, David Rosen’s Rubric Capital Management and Israel Englander’s Millennium Management.
As industrywide interest jumped, some big names have jumped into BioDelivery Sciences International, Inc. (NASDAQ:BDSI) headfirst. Renaissance Technologies, managed by Jim Simons, assembled the most valuable position in BioDelivery Sciences International, Inc. (NASDAQ:BDSI). Renaissance Technologies had $2 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $1.1 million investment in the stock during the quarter. The other funds with brand new BDSI positions are Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Andrew Weiss’s Weiss Asset Management, and Mike Vranos’s Ellington.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BioDelivery Sciences International, Inc. (NASDAQ:BDSI) but similarly valued. We will take a look at The Lovesac Company (NASDAQ:LOVE), Nam Tai Property Inc (NYSE:NTP), IES Holdings, Inc. (NASDAQ:IESC), and Old Second Bancorp Inc. (NASDAQ:OSBC). This group of stocks’ market values are similar to BDSI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LOVE | 8 | 30396 | 1 |
| NTP | 5 | 46107 | -1 |
| IESC | 5 | 235210 | 0 |
| OSBC | 12 | 32129 | 2 |
| Average | 7.5 | 85961 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $124 million in BDSI’s case. Old Second Bancorp Inc. (NASDAQ:OSBC) is the most popular stock in this table. On the other hand Nam Tai Property Inc (NYSE:NTP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks BioDelivery Sciences International, Inc. (NASDAQ:BDSI) 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 BDSI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BDSI were disappointed as the stock returned -20% 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.
