We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Bristol Myers Squibb Company (NYSE:BMY).
Is Bristol Myers Squibb Company (NYSE:BMY) a healthy stock for your portfolio? Investors who are in the know are reducing their bets on the stock. The number of bullish hedge fund bets retreated by 9 lately. Our calculations also showed that BMY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BMY was in 56 hedge funds’ portfolios at the end of September. There were 65 hedge funds in our database with BMY holdings at the end of the previous quarter.
Video: Click the image to 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ray Dalio of Bridgewater Associates
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the fresh hedge fund action regarding Bristol Myers Squibb Company (NYSE:BMY).
How are hedge funds trading Bristol Myers Squibb Company (NYSE:BMY)?
Heading into the fourth quarter of 2019, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BMY over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the number one position in Bristol Myers Squibb Company (NYSE:BMY). Renaissance Technologies has a $1.6611 billion position in the stock, comprising 1.4% of its 13F portfolio. On Renaissance Technologies’s heels is Baupost Group, managed by Seth Klarman, which holds a $507.1 million position; 5.7% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism encompass John Overdeck and David Siegel’s Two Sigma Advisors, Cliff Asness’s AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Copernicus Capital Management allocated the biggest weight to Bristol Myers Squibb Company (NYSE:BMY), around 9.34% of its portfolio. Prosight Capital is also relatively very bullish on the stock, setting aside 8.58 percent of its 13F equity portfolio to BMY.
Judging by the fact that Bristol Myers Squibb Company (NYSE:BMY) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of money managers who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Samuel Isaly’s OrbiMed Advisors said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $61 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $50.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 9 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bristol Myers Squibb Company (NYSE:BMY) but similarly valued. These stocks are CVS Health Corporation (NYSE:CVS), Itau Unibanco Holding SA (NYSE:ITUB), Fidelity National Information Services Inc. (NYSE:FIS), and Banco Santander (Brasil) SA (NYSE:BSBR). This group of stocks’ market values are closest to BMY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVS | 47 | 924996 | -8 |
| ITUB | 17 | 1060568 | -1 |
| FIS | 90 | 7126015 | 31 |
| BSBR | 14 | 125130 | 3 |
| Average | 42 | 2309177 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $2309 million. That figure was $3842 million in BMY’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 14 bullish hedge fund positions. Bristol Myers Squibb Company (NYSE:BMY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BMY as the stock returned 13.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
