Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Blueprint Medicines Corp (NASDAQ:BPMC) was in 16 hedge funds’ portfolios at the end of September. BPMC has seen an increase in enthusiasm from smart money lately. There were 12 hedge funds in our database with BPMC positions 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 Getty Realty Corp. (NYSE:GTY), Avianca Holdings SA (ADR) (NYSE:AVH), and Briggs & Stratton Corporation (NYSE:BGG) to gather more data points.
Follow Blueprint Medicines Corp (NASDAQ:BPMC)
Follow Blueprint Medicines Corp (NASDAQ:BPMC)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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Hedge fund activity in Blueprint Medicines Corp (NASDAQ:BPMC)
Heading into the fourth quarter of 2016, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a jump of 33% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in BPMC over the last 5 quarters. 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, Mark Lampert’s Biotechnology Value Fund / BVF Inc has the largest position in Blueprint Medicines Corp (NASDAQ:BPMC), worth close to $82.1 million, amounting to 15.5% of its total 13F portfolio. The second largest stake is held by Richard Driehaus of Driehaus Capital, with a $27 million position. Remaining hedge funds and institutional investors that hold long positions contain James A. Silverman’s Opaleye Management, Christopher James’ Partner Fund Management and Joseph Edelman’s Perceptive Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, some big names have been driving this bullishness. Deerfield Management, led by James E. Flynn, initiated the most valuable position in Blueprint Medicines Corp (NASDAQ:BPMC). Deerfield Management had $6.4 million invested in the company at the end of the quarter. D E Shaw, one of the biggest hedge funds in the world also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new BPMC investors: Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group, and Jim Simons’ Renaissance Technologies.
Let’s go over hedge fund activity in other stocks similar to Blueprint Medicines Corp (NASDAQ:BPMC). We will take a look at Getty Realty Corp. (NYSE:GTY), Avianca Holdings SA (ADR) (NYSE:AVH), Briggs & Stratton Corporation (NYSE:BGG), and American Railcar Industries, Inc. (NASDAQ:ARII). All of these stocks’ market caps match BPMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GTY | 9 | 37335 | 1 |
| AVH | 5 | 2377 | 5 |
| BGG | 19 | 94719 | 1 |
| ARII | 16 | 522934 | 5 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $164 million. That figure was $195 million in BPMC’s case. Briggs & Stratton Corporation (NYSE:BGG) is the most popular stock in this table. On the other hand Avianca Holdings SA (ADR) (NYSE:AVH) is the least popular one with only 5 bullish hedge fund positions. Blueprint Medicines Corp (NASDAQ:BPMC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BGG might be a better candidate to consider taking a long position in.
Disclosure: None
