Is BDTX A Good Stock To Buy Now?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Black Diamond Therapeutics, Inc. (NASDAQ:BDTX) changed recently.

Is BDTX a good stock to buy now? Black Diamond Therapeutics, Inc. (NASDAQ:BDTX) has experienced a decrease in enthusiasm from smart money recently. Black Diamond Therapeutics, Inc. (NASDAQ:BDTX) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that BDTX 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.

At the moment there are a multitude of indicators shareholders employ to value publicly traded companies. A pair of the most under-the-radar indicators are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outpace the S&P 500 by a significant margin (see the details here).

Peter Kolchinsky of RA Capital Management

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. With all of this in mind let’s take a gander at the new hedge fund action encompassing Black Diamond Therapeutics, Inc. (NASDAQ:BDTX).

Do Hedge Funds Think BDTX Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the second quarter of 2020. By comparison, 0 hedge funds held shares or bullish call options in BDTX a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

More specifically, RA Capital Management was the largest shareholder of Black Diamond Therapeutics, Inc. (NASDAQ:BDTX), with a stake worth $78.3 million reported as of the end of September. Trailing RA Capital Management was Deerfield Management, which amassed a stake valued at $24.3 million. Avoro Capital Advisors (venBio Select Advisor), Driehaus Capital, and Ikarian Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position RA Capital Management allocated the biggest weight to Black Diamond Therapeutics, Inc. (NASDAQ:BDTX), around 1.43% of its 13F portfolio. Ikarian Capital is also relatively very bullish on the stock, designating 0.79 percent of its 13F equity portfolio to BDTX.

Since Black Diamond Therapeutics, Inc. (NASDAQ:BDTX) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers who sold off their entire stakes in the third quarter. Interestingly, Joseph Edelman’s Perceptive Advisors sold off the biggest position of all the hedgies watched by Insider Monkey, valued at an estimated $44 million in stock, and Mark Lampert’s Biotechnology Value Fund / BVF Inc was right behind this move, as the fund dropped about $16 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Black Diamond Therapeutics, Inc. (NASDAQ:BDTX) but similarly valued. We will take a look at Middlesex Water Company (NASDAQ:MSEX), Fresh Del Monte Produce Inc (NYSE:FDP), Sandy Spring Bancorp Inc. (NASDAQ:SASR), Grupo Simec S.A.B. de C.V. (NYSE:SIM), FARO Technologies, Inc. (NASDAQ:FARO), Adaptimmune Therapeutics plc (NASDAQ:ADAP), and Constellium SE (NYSE:CSTM). This group of stocks’ market valuations resemble BDTX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $171 million in BDTX’s case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand Grupo Simec S.A.B. de C.V. (NYSE:SIM) is the least popular one with only 1 bullish hedge fund positions. Black Diamond Therapeutics, Inc. (NASDAQ:BDTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BDTX is 44.6. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on BDTX as the stock returned 12.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.