In this article you are going to find out whether hedge funds think Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) a bargain? Investors who are in the know are becoming less hopeful. The number of bullish hedge fund bets went down by 6 recently. Our calculations also showed that BHVN 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.
To most market participants, hedge funds are perceived as underperforming, old investment vehicles of years past. While there are over 8000 funds with their doors open at the moment, We choose to focus on the crème de la crème of this group, about 850 funds. It is estimated that this group of investors have their hands on the lion's share of all hedge funds' total asset base, and by keeping an eye on their unrivaled picks, Insider Monkey has revealed various investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
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 trades like this one as well as this tiny lithium play. 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 take a gander at the recent hedge fund action encompassing Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN).
Hedge fund activity in Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN)
At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in BHVN a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) was held by Marshall Wace LLP, which reported holding $87.2 million worth of stock at the end of September. It was followed by Kingdon Capital with a $49.8 million position. Other investors bullish on the company included Armistice Capital, Great Point Partners, and Polar Capital. In terms of the portfolio weights assigned to each position Knoll Capital Management allocated the biggest weight to Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), around 27.41% of its 13F portfolio. Kingdon Capital is also relatively very bullish on the stock, designating 9.11 percent of its 13F equity portfolio to BHVN.
Due to the fact that Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) has experienced falling interest from the smart money, it's easy to see that there lies a certain "tier" of funds that slashed their positions entirely in the first quarter. It's worth mentioning that Steve Cohen's Point72 Asset Management sold off the largest investment of the 750 funds followed by Insider Monkey, totaling an estimated $24.8 million in stock. Kevin Kotler's fund, Broadfin Capital, also said goodbye to its stock, about $22.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds in the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) but similarly valued. We will take a look at Cronos Group Inc. (NASDAQ:CRON), Ryman Hospitality Properties, Inc. (NYSE:RHP), ESCO Technologies Inc. (NYSE:ESE), and South State Corporation (NASDAQ:SSB). This group of stocks' market caps match BHVN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRON,10,73477,0 RHP,26,266783,-4 ESE,8,59966,-1 SSB,12,77340,-3 Average,14,119392,-2 [/table]
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 $119 million. That figure was $391 million in BHVN's case. Ryman Hospitality Properties, Inc. (NYSE:RHP) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on BHVN as the stock returned 83.6% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.