Is BioTime, Inc. (BTX) A Good Stock To Buy?

It’s a little-known fact that stocks’ performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data, though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

With this in mind, we have decided to take a closer look at the latest hedge fund activity surrounding BioTime, Inc. (NYSEMKT:BTX). The stock embarked on a downtrend in May and is 7.50% in the red year-to-date. Moreover, the number of long hedge fund bets was trimmed by 3 during the third quarter. BTX was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. There were 14 hedge funds in our database with BTX holdings at the end of the previous quarter. At the end of this article we will also compare BTX to other stocks, including QuinStreet Inc (NASDAQ:QNST), ChannelAdvisor Corp (NYSE:ECOM), and Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) to get a better sense of its popularity.

To the average investor there are a multitude of tools investors employ to appraise publicly traded companies. Some of the most under-the-radar tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outclass the S&P 500 by a superb amount (see the details here).

With all of this in mind, we’re going to view the recent action surrounding BioTime, Inc. (NYSEMKT:BTX).

What does the smart money think about BioTime, Inc. (NYSEMKT:BTX)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 21% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Broadwood Capital, managed by Neal C. Bradsher, holds the biggest position in BioTime, Inc. (NYSEMKT:BTX). Broadwood Capital has a $60.8 million position in the stock, comprising 12% of its 13F portfolio. The second largest stake is held by Mark Broach’s Manatuck Hill Partners, with an $3.5 million position; 1.5% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish contain Mitchell Blutt’s Consonance Capital Management, Warren Lammert’s Granite Point Capital, and Bart Baum’s Ionic Capital Management.

Because BioTime, Inc. (NYSEMKT:BTX) has witnessed a decline in interest from hedge fund managers, logic holds that there is a sect of fund managers that slashed their full holdings last quarter. It’s worth mentioning that Jim Simons’ Renaissance Technologies sold off the largest investment of all the hedgies monitored by Insider Monkey, valued at close to $0.6 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $0.2 million worth.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BioTime, Inc. (NYSEMKT:BTX) but similarly valued. These stocks are QuinStreet Inc (NASDAQ:QNST), ChannelAdvisor Corp (NYSE:ECOM), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), and Papa Murphy’s Holdings Inc (NASDAQ:FRSH). This group of stocks’ market valuations are closest to BTX’s market valuation.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $35 million, compared to $67 million in BTX’s case. QuinStreet Inc (NASDAQ:QNST) is the most popular stock in this table. On the other hand ChannelAdvisor Corp (NYSE:ECOM) and Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) are the least popular ones with only 7 bullish hedge fund positions. BioTime, Inc. (NYSEMKT:BTX) 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 QNST might be a better candidate to consider a long position.