At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Bellerophon Therapeutics, Inc. (NASDAQ:BLPH).
Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) was in 4 hedge funds' portfolios at the end of the first quarter of 2020. BLPH investors should be aware of an increase in hedge fund sentiment in recent months. There were 2 hedge funds in our database with BLPH positions at the end of the previous quarter. Our calculations also showed that BLPH isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 S&P 500 ETFs by 51 percentage points since March 2017 (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.
[caption id="attachment_30633" align="aligncenter" width="400"] Alan Fournier of Pennant Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to analyze the key hedge fund action encompassing Bellerophon Therapeutics, Inc. (NASDAQ:BLPH).
What have hedge funds been doing with Bellerophon Therapeutics, Inc. (NASDAQ:BLPH)?
At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 100% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BLPH over the last 18 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ted Wang's Puissance Capital Managementá has the number one position in Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), worth close to $6.1 million, corresponding to 70.8% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $1.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish consist of Alan Fournier's Pennant Capital Management, Sander Gerber's Hudson Bay Capital Management and . In terms of the portfolio weights assigned to each position Puissance Capital Managementá allocated the biggest weight to Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), around 70.84% of its 13F portfolio. Pennant Capital Management is also relatively very bullish on the stock, earmarking 0.28 percent of its 13F equity portfolio to BLPH.
As one would reasonably expect, key money managers have been driving this bullishness. Pennant Capital Management, managed by Alan Fournier, initiated the biggest position in Bellerophon Therapeutics, Inc. (NASDAQ:BLPH). Pennant Capital Management had $0.8 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also initiated a $0.3 million position during the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) but similarly valued. These stocks are Kentucky First Federal Bancorp (NASDAQ:KFFB), Outlook Therapeutics, Inc. (NASDAQ:OTLK), Yunhong International (NASDAQ:ZGYHU), and California Resources Corporation (NYSE:CRC). This group of stocks' market values resemble BLPH's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KFFB,1,410,0 OTLK,6,3049,0 ZGYHU,5,19649,5 CRC,7,612,-12 Average,4.75,5930,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $9 million in BLPH's case. California Resources Corporation (NYSE:CRC) is the most popular stock in this table. On the other hand Kentucky First Federal Bancorp (NASDAQ:KFFB) is the least popular one with only 1 bullish hedge fund positions. Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on BLPH as the stock returned 29.4% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.