"Market conditions are changing. The continued rise in interest rates suggests we are in the early stages of a bond bear market, which could intensify as central banks withdraw liquidity. The receding tide of liquidity will start to reveal more rocks beyond what has been exposed in emerging markets so far, and the value of a value discipline will be in avoiding the biggest capital-destroying rocks. If a rock emerges on the crowded shore of U.S. momentum, it could result in a major liquidity challenge, as momentum is often most intense on the downside as a crowded trade reverses. So investors are facing a large potential trade-off right now: continue to bet on the current dominance of momentum and the S&P 500, or bet on change and take an active value bet in names with attractive value and optionality, but with negative momentum," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Bio-Rad Laboratories, Inc. (NYSE:BIO).
Is Bio-Rad Laboratories, Inc. (NYSE:BIO) a worthy stock to buy now? Even though the number of long hedge fund bets shrunk by 3 during the fourth quarter of 2018, overall hedge fund sentiment towards the stock is near its all time high. Our calculations also showed that BIO isn't among the 30 most popular stocks among hedge funds.
In the financial world there are numerous methods stock market investors use to appraise stocks. Two of the most under-the-radar methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top fund managers can beat the market by a very impressive amount (see the details here).
Let's take a look at the latest hedge fund action regarding Bio-Rad Laboratories, Inc. (NYSE:BIO).
What does the smart money think about Bio-Rad Laboratories, Inc. (NYSE:BIO)?
At the end of the fourth quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the second quarter of 2018. By comparison, 37 hedge funds held shares or bullish call options in BIO a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Levin Capital Strategies, managed by John A. Levin, holds the biggest position in Bio-Rad Laboratories, Inc. (NYSE:BIO). Levin Capital Strategies has a $132.2 million position in the stock, comprising 2.9% of its 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $92.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish include Ken Fisher's Fisher Asset Management, Brian Ashford-Russell and Tim Woolley's Polar Capital and D. E. Shaw's D E Shaw.
Due to the fact that Bio-Rad Laboratories, Inc. (NYSE:BIO) has experienced bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of hedgies that elected to cut their positions entirely heading into Q3. Interestingly, Per Johanssoná's Bodenholm Capital dumped the largest position of all the hedgies watched by Insider Monkey, valued at close to $32.5 million in stock, and Phill Gross and Robert Atchinson's Adage Capital Management was right behind this move, as the fund dropped about $28.2 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds heading into Q3.
Let's check out 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 ON Semiconductor Corporation (NASDAQ:ON), Robert Half International Inc. (NYSE:RHI), Enel Chile S.A. (NYSE:ENIC), and Vereit Inc (NYSE:VER). This group of stocks' market valuations match BIO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ON,29,423253,2 RHI,26,554927,-2 ENIC,7,27199,3 VER,18,361397,-4 Average,20,341694,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $342 million. That figure was $685 million in BIO's case. ON Semiconductor Corporation (NASDAQ:ON) is the most popular stock in this table. On the other hand Enel Chile S.A. (NYSE:ENIC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Bio-Rad Laboratories, Inc. (NYSE:BIO) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on BIO as the stock returned 33.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.