Was The Smart Money Right About Crowding Into Bio-Rad Laboratories, Inc. (BIO)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Bio-Rad Laboratories, Inc. (NYSE:BIO) changed recently.

Is Bio-Rad Laboratories, Inc. (NYSE:BIO) worth your attention right now? Money managers were becoming more confident. The number of long hedge fund positions increased by 15 lately. Bio-Rad Laboratories, Inc. (NYSE:BIO) was in 54 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BIO isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ian Wace of Marshall Wace

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now let’s analyze the latest hedge fund action encompassing Bio-Rad Laboratories, Inc. (NYSE:BIO).

How are hedge funds trading Bio-Rad Laboratories, Inc. (NYSE:BIO)?

Heading into the third quarter of 2020, a total of 54 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BIO over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Bio-Rad Laboratories, Inc. (NYSE:BIO) was held by AQR Capital Management, which reported holding $154.9 million worth of stock at the end of September. It was followed by GQG Partners with a $133.4 million position. Other investors bullish on the company included Marshall Wace LLP, Fisher Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Tower House Partners allocated the biggest weight to Bio-Rad Laboratories, Inc. (NYSE:BIO), around 18.56% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, earmarking 3.9 percent of its 13F equity portfolio to BIO.

Now, specific money managers were breaking ground themselves. GQG Partners, managed by Rajiv Jain, established the most outsized position in Bio-Rad Laboratories, Inc. (NYSE:BIO). GQG Partners had $133.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $12.2 million investment in the stock during the quarter. The other funds with brand new BIO positions are Steve Cohen’s Point72 Asset Management, Donald Sussman’s Paloma Partners, and Leonard Green’s Leonard Green & Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Bio-Rad Laboratories, Inc. (NYSE:BIO) but similarly valued. These stocks are Vipshop Holdings Limited (NYSE:VIPS), Altice USA, Inc. (NYSE:ATUS), M&T Bank Corporation (NYSE:MTB), Sun Communities Inc (NYSE:SUI), Magna International Inc. (NYSE:MGA), Leidos Holdings Inc (NYSE:LDOS), and Wix.Com Ltd (NASDAQ:WIX). This group of stocks’ market caps are closest to BIO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $922 million. That figure was $1129 million in BIO’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Magna International Inc. (NYSE:MGA) is the least popular one with only 19 bullish hedge fund positions. Bio-Rad Laboratories, Inc. (NYSE:BIO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BIO is 86.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on BIO as the stock returned 28.8% since the end of Q2 (through 10/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.