We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Blueprint Medicines Corporation (NASDAQ:BPMC).
Is BPMC stock a buy or sell? Money managers were in a bullish mood. The number of long hedge fund positions increased by 4 lately. Blueprint Medicines Corporation (NASDAQ:BPMC) was in 38 hedge funds’ portfolios at the end of December. The all time high for this statistic is 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BPMC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 34 hedge funds in our database with BPMC holdings at the end of September.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 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.
Lei Zhang of Hillhouse 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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 check out the new hedge fund action regarding Blueprint Medicines Corporation (NASDAQ:BPMC).
Do Hedge Funds Think BPMC Is A Good Stock To Buy Now?
At Q4’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in BPMC over the last 22 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Lone Pine Capital was the largest shareholder of Blueprint Medicines Corporation (NASDAQ:BPMC), with a stake worth $303.8 million reported as of the end of December. Trailing Lone Pine Capital was Casdin Capital, which amassed a stake valued at $173.8 million. Hillhouse Capital Management, Cadian Capital, and Alkeon Capital Management 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 Aquilo Capital Management allocated the biggest weight to Blueprint Medicines Corporation (NASDAQ:BPMC), around 8.86% of its 13F portfolio. DAFNA Capital Management is also relatively very bullish on the stock, earmarking 6.9 percent of its 13F equity portfolio to BPMC.
As aggregate interest increased, key hedge funds were breaking ground themselves. Lone Pine Capital, created the biggest position in Blueprint Medicines Corporation (NASDAQ:BPMC). Lone Pine Capital had $303.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $14.1 million position during the quarter. The other funds with new positions in the stock are Prashanth Jayaram’s Tri Locum Partners, Principal Global Investors’s Columbus Circle Investors, and Frank Fu’s CaaS Capital.
Let’s also examine 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 Grupo Aeroportuario del Pacifico (NYSE:PAC), Lattice Semiconductor Corporation (NASDAQ:LSCC), Exelixis, Inc. (NASDAQ:EXEL), Tetra Tech, Inc. (NASDAQ:TTEK), Littelfuse, Inc. (NASDAQ:LFUS), AppFolio Inc (NASDAQ:APPF), and Pure Storage, Inc. (NYSE:PSTG). This group of 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 |
|---|---|---|---|
| PAC | 4 | 120455 | -2 |
| LSCC | 23 | 265612 | -1 |
| EXEL | 24 | 917565 | -10 |
| TTEK | 29 | 98927 | 7 |
| LFUS | 21 | 486085 | -1 |
| APPF | 19 | 475881 | -7 |
| PSTG | 21 | 1128272 | -1 |
| Average | 20.1 | 498971 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $499 million. That figure was $1246 million in BPMC’s case. Tetra Tech, Inc. (NASDAQ:TTEK) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 4 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 89. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Unfortunately BPMC wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on BPMC were disappointed as the stock returned -6.7% since the end of the fourth quarter (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
