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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 BridgeBio Pharma, Inc. (NASDAQ:BBIO).
Is BBIO stock a buy? BridgeBio Pharma, Inc. (NASDAQ:BBIO) has experienced an increase in hedge fund interest recently. BridgeBio Pharma, Inc. (NASDAQ:BBIO) was in 23 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 14. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BBIO isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the 21st century investor’s toolkit there are numerous metrics stock market investors have at their disposal to size up publicly traded companies. A pair of the less known metrics are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace the S&P 500 by a superb amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .
Andreas Halvorsen of Viking Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now 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. Now we're going to go over the key hedge fund action regarding BridgeBio Pharma, Inc. (NASDAQ:BBIO).
Do Hedge Funds Think BBIO Is A Good Stock To Buy Now?
At Q4's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 77% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BBIO over the last 22 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Viking Global was the largest shareholder of BridgeBio Pharma, Inc. (NASDAQ:BBIO), with a stake worth $1893 million reported as of the end of December. Trailing Viking Global was Perceptive Advisors, which amassed a stake valued at $476.9 million. Hillhouse Capital Management, Cormorant Asset Management, and Darwin Global 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 Darwin Global Management allocated the biggest weight to BridgeBio Pharma, Inc. (NASDAQ:BBIO), around 13.15% of its 13F portfolio. Viking Global is also relatively very bullish on the stock, setting aside 5.21 percent of its 13F equity portfolio to BBIO.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Darwin Global Management, managed by Abhishek Trehan, established the largest position in BridgeBio Pharma, Inc. (NASDAQ:BBIO). Darwin Global Management had $47.1 million invested in the company at the end of the quarter. David Cohen and Harold Levy's Iridian Asset Management also initiated a $38.7 million position during the quarter. The other funds with brand new BBIO positions are Doron Breen and Mori Arkin's Sphera Global Healthcare Fund, John Overdeck and David Siegel's Two Sigma Advisors, and Guy Shahar's DSAM Partners.
Let's check out hedge fund activity in other stocks similar to BridgeBio Pharma, Inc. (NASDAQ:BBIO). We will take a look at The Mosaic Company (NYSE:MOS), Aluminum Corp. of China Limited (NYSE:ACH), The New York Times Company (NYSE:NYT), Tapestry, Inc. (NYSE:TPR), Globant SA (NYSE:GLOB), Alleghany Corporation (NYSE:Y), and Dada Nexus Limited (NASDAQ:DADA). This group of stocks' market caps resemble BBIO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MOS,39,841121,8 ACH,4,7199,0 NYT,50,2749728,5 TPR,49,1295430,10 GLOB,15,279923,-6 Y,34,364699,5 DADA,25,168093,8 Average,30.9,815170,4.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $815 million. That figure was $3029 million in BBIO's case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 bullish hedge fund positions. BridgeBio Pharma, Inc. (NASDAQ:BBIO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BBIO is 60.7. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately BBIO wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); BBIO investors were disappointed as the stock returned -21.9% since the end of December (through 4/19) 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 in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.