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 Bristol Myers Squibb Company (NYSE:BMY).
Is Bristol Myers Squibb Company (NYSE:BMY) the right investment to pursue these days? Hedge funds were reducing their bets on the stock. The number of long hedge fund bets were cut by 50 in recent months. Bristol Myers Squibb Company (NYSE:BMY) was in 81 hedge funds’ portfolios at the end of March. The all time high for this statistic is 136. Our calculations also showed that BMY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a gander at the recent hedge fund action encompassing Bristol Myers Squibb Company (NYSE:BMY).
Do Hedge Funds Think BMY Is A Good Stock To Buy Now?
At Q1’s end, a total of 81 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BMY over the last 23 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Bristol Myers Squibb Company (NYSE:BMY) was held by Berkshire Hathaway, which reported holding $1959.1 million worth of stock at the end of December. It was followed by Renaissance Technologies with a $440.2 million position. Other investors bullish on the company included Viking Global, OrbiMed Advisors, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Birchview Capital allocated the biggest weight to Bristol Myers Squibb Company (NYSE:BMY), around 29.76% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, dishing out 8.27 percent of its 13F equity portfolio to BMY.
Because Bristol Myers Squibb Company (NYSE:BMY) has experienced a decline in interest from the smart money, it’s easy to see that there is a sect of money managers that decided to sell off their entire stakes last quarter. Intriguingly, Arthur B Cohen and Joseph Healey’s Healthcor Management LP sold off the biggest investment of the 750 funds watched by Insider Monkey, worth an estimated $80.5 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund cut about $55.8 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 50 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Bristol Myers Squibb Company (NYSE:BMY) but similarly valued. We will take a look at Philip Morris International Inc. (NYSE:PM), Shopify Inc (NYSE:SHOP), Lowe’s Companies, Inc. (NYSE:LOW), Charter Communications, Inc. (NASDAQ:CHTR), JD.Com Inc (NASDAQ:JD), Royal Bank of Canada (NYSE:RY), and Sony Corporation (NYSE:SNE). All of these stocks’ market caps resemble BMY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PM | 48 | 5494085 | -4 |
| SHOP | 91 | 9984457 | 1 |
| LOW | 61 | 5171876 | -10 |
| CHTR | 74 | 16399220 | -16 |
| JD | 75 | 11309916 | -14 |
| RY | 18 | 716039 | 0 |
| SNE | 27 | 541868 | -1 |
| Average | 56.3 | 7088209 | -6.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.3 hedge funds with bullish positions and the average amount invested in these stocks was $7088 million. That figure was $5037 million in BMY’s case. Shopify Inc (NYSE:SHOP) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 18 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 overall hedge fund sentiment score for BMY is 16. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately BMY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BMY were disappointed as the stock returned 6.7% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
