Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Blueprint Medicines Corporation (NASDAQ:BPMC)? The smart money sentiment can provide an answer to this question.
Is BPMC a good stock to buy? Prominent investors were getting less bullish. The number of bullish hedge fund positions fell by 4 lately. Blueprint Medicines Corporation (NASDAQ:BPMC) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 38. Our calculations also showed that BPMC 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.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 we’re going to take a peek at the latest hedge fund action surrounding Blueprint Medicines Corporation (NASDAQ:BPMC).
Do Hedge Funds Think BPMC Is A Good Stock To Buy Now?
At third quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BPMC over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Eric Bannasch’s Cadian Capital has the most valuable position in Blueprint Medicines Corporation (NASDAQ:BPMC), worth close to $249.1 million, amounting to 8.1% of its total 13F portfolio. The second most bullish fund manager is Casdin Capital, led by Eli Casdin, holding a $143.7 million position; 6.4% of its 13F portfolio is allocated to the company. Other peers that are bullish include Andreas Halvorsen’s Viking Global, Lei Zhang’s Hillhouse Capital Management and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Cadian Capital allocated the biggest weight to Blueprint Medicines Corporation (NASDAQ:BPMC), around 8.11% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, designating 7.02 percent of its 13F equity portfolio to BPMC.
Because Blueprint Medicines Corporation (NASDAQ:BPMC) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few funds that elected to cut their entire stakes in the third quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising close to $58 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also dumped its stock, about $23.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell 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 Blueprint Medicines Corporation (NASDAQ:BPMC) but similarly valued. We will take a look at ITT Inc. (NYSE:ITT), BlackLine, Inc. (NASDAQ:BL), Eastgroup Properties Inc (NYSE:EGP), Ingredion Incorporated (NYSE:INGR), First Industrial Realty Trust, Inc. (NYSE:FR), Nielsen Holdings plc (NYSE:NLSN), and CoreSite Realty Corp (NYSE:COR). All of these stocks’ market caps are similar to BPMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ITT | 30 | 477657 | 5 |
| BL | 17 | 233073 | -1 |
| EGP | 10 | 51895 | -4 |
| INGR | 23 | 243468 | 1 |
| FR | 26 | 418925 | -4 |
| NLSN | 30 | 943619 | -1 |
| COR | 19 | 163584 | -2 |
| Average | 22.1 | 361746 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $1221 million in BPMC’s case. ITT Inc. (NYSE:ITT) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Blueprint Medicines Corporation (NASDAQ:BPMC) is more popular among hedge funds. Our overall hedge fund sentiment score for BPMC is 77.8. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on BPMC as the stock returned 33.4% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
