Where Do Hedge Funds Stand On Butterfly Network, Inc. (BFLY)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Butterfly Network, Inc. (NYSE:BFLY).

Butterfly Network, Inc. (NYSE:BFLY) was in 24 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 32. BFLY investors should be aware of a decrease in enthusiasm from smart money in recent months. There were 32 hedge funds in our database with BFLY positions at the end of the first quarter. Our calculations also showed that BFLY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In today’s marketplace there are dozens of gauges shareholders have at their disposal to size up publicly traded companies. Two of the less utilized gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace the broader indices by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Andy Redleaf of Whitebox Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. With all of this in mind we’re going to view the recent hedge fund action regarding Butterfly Network, Inc. (NYSE:BFLY).

Do Hedge Funds Think BFLY Is A Good Stock To Buy Now?

At Q2’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in BFLY a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, ARK Investment Management held the most valuable stake in Butterfly Network, Inc. (NYSE:BFLY), which was worth $114.8 million at the end of the second quarter. On the second spot was Glenview Capital which amassed $71.9 million worth of shares. Partner Fund Management, Honeycomb Asset Management, and Ionic 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 Glenview Capital allocated the biggest weight to Butterfly Network, Inc. (NYSE:BFLY), around 1.21% of its 13F portfolio. Ionic Capital Management is also relatively very bullish on the stock, setting aside 1.15 percent of its 13F equity portfolio to BFLY.

Seeing as Butterfly Network, Inc. (NYSE:BFLY) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that decided to sell off their full holdings last quarter. Intriguingly, Israel Englander’s Millennium Management sold off the largest stake of the “upper crust” of funds watched by Insider Monkey, worth about $14.7 million in stock. Efrem Kamen’s fund, Pura Vida Investments, also said goodbye to its stock, about $3.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 8 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Butterfly Network, Inc. (NYSE:BFLY) but similarly valued. We will take a look at Columbia Banking System Inc (NASDAQ:COLB), Domtar Corporation (NYSE:UFS), SPX Corporation (NYSE:SPXC), Vivint Smart Home, Inc. (NYSE:VVNT), SPX FLOW, Inc. (NYSE:FLOW), Axos Financial, Inc. (NYSE:AX), and Criteo SA (NASDAQ:CRTO). This group of stocks’ market valuations resemble BFLY’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $263 million in BFLY’s case. Domtar Corporation (NYSE:UFS) is the most popular stock in this table. On the other hand Vivint Smart Home, Inc. (NYSE:VVNT) is the least popular one with only 5 bullish hedge fund positions. Butterfly Network, Inc. (NYSE:BFLY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BFLY is 59.1. 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. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately BFLY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BFLY were disappointed as the stock returned -28.5% since the end of June (through 10/22) 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.