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Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Bellerophon Therapeutics, Inc. (NASDAQ:BLPH).
Hedge fund interest in Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BLPH to other stocks including Data I/O Corporation (NASDAQ:DAIO), Jewett-Cameron Trading Company Ltd. (NASDAQ:JCTCF), and Entree Gold Inc (NYSE:EGI) to get a better sense of its popularity.
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.
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Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's review the latest hedge fund action regarding Bellerophon Therapeutics, Inc. (NASDAQ:BLPH).
What have hedge funds been doing with Bellerophon Therapeutics, Inc. (NASDAQ:BLPH)?
At the end of the third quarter, a total of 5 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. By comparison, 3 hedge funds held shares or bullish call options in BLPH a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Puissance Capital Management, managed by Ted Wang, holds the largest position in Bellerophon Therapeutics, Inc. (NASDAQ:BLPH). Puissance Capital Management has a $4 million position in the stock, comprising 8.9% of its 13F portfolio. Coming in second is Renaissance Technologies holding a $0.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions comprise Steven Boyd's Armistice Capital, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Puissance Capital Management allocated the biggest weight to Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), around 8.92% of its 13F portfolio. Armistice Capital is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to BLPH.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) but similarly valued. We will take a look at Data I/O Corporation (NASDAQ:DAIO), Jewett-Cameron Trading Co Ltd. (NASDAQ:JCTCF), Entree Gold Inc (NYSE:EGI), and China Internet Nationwide Financial Services Inc. (NASDAQ:CIFS). This group of stocks' market values are similar to BLPH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DAIO,1,2566,-1 JCTCF,1,1536,0 EGI,2,1557,0 CIFS,2,964,1 Average,1.5,1656,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $5 million in BLPH's case. Entree Gold Inc (NYSE:EGI) is the most popular stock in this table. On the other hand Data I/O Corporation (NASDAQ:DAIO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) is more popular among hedge funds. 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. Unfortunately BLPH wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BLPH were disappointed as the stock returned -11% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.