We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was BioScrip Inc. (NASDAQ:BIOS).
BioScrip Inc. (NASDAQ:BIOS) was in 14 hedge funds’ portfolios at the end of the fourth quarter of 2019. BIOS investors should pay attention to a decrease in hedge fund interest in recent months. There were 18 hedge funds in our database with BIOS positions at the end of the previous quarter. Our calculations also showed that BIOS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the new hedge fund action regarding BioScrip Inc. (NASDAQ:BIOS).
Hedge fund activity in BioScrip Inc. (NASDAQ:BIOS)
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BIOS over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in BioScrip Inc. (NASDAQ:BIOS) was held by Venor Capital Management, which reported holding $46.4 million worth of stock at the end of September. It was followed by Coliseum Capital with a $11.6 million position. Other investors bullish on the company included Royce & Associates, Renaissance Technologies, and Alta Fundamental Advisers. In terms of the portfolio weights assigned to each position Venor Capital Management allocated the biggest weight to BioScrip Inc. (NASDAQ:BIOS), around 69.44% of its 13F portfolio. Alta Fundamental Advisers is also relatively very bullish on the stock, dishing out 3.15 percent of its 13F equity portfolio to BIOS.
Judging by the fact that BioScrip Inc. (NASDAQ:BIOS) has faced falling interest from the smart money, it’s safe to say that there was a specific group of hedge funds who were dropping their full holdings last quarter. It’s worth mentioning that Ric Dillon’s Diamond Hill Capital dropped the biggest stake of all the hedgies followed by Insider Monkey, comprising an estimated $1.5 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $1.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BioScrip Inc. (NASDAQ:BIOS) but similarly valued. We will take a look at HB Fuller Co (NYSE:FUL), Integer Holdings Corporation (NYSE:ITGR), Black Stone Minerals LP (NYSE:BSM), and Dana Incorporated (NYSE:DAN). This group of stocks’ market values are similar to BIOS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FUL | 14 | 207147 | -2 |
| ITGR | 20 | 178198 | 3 |
| BSM | 4 | 3673 | -3 |
| DAN | 27 | 277930 | 0 |
| Average | 16.25 | 166737 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $167 million. That figure was $86 million in BIOS’s case. Dana Incorporated (NYSE:DAN) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 4 bullish hedge fund positions. BioScrip Inc. (NASDAQ:BIOS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately BIOS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BIOS investors were disappointed as the stock returned -37.2% during the same time 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
