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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) to find out whether there were any major changes in hedge funds' views.
Is BMRN a good stock to buy? BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) investors should pay attention to a decrease in hedge fund sentiment of late. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) was in 43 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 54. Our calculations also showed that BMRN isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Felix Baker of Baker Bros.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. Now we're going to view the new hedge fund action encompassing BioMarin Pharmaceutical Inc. (NASDAQ:BMRN).
Do Hedge Funds Think BMRN Is A Good Stock To Buy Now?
At Q1's end, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the fourth quarter of 2020. On the other hand, there were a total of 54 hedge funds with a bullish position in BMRN a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Baker Bros. Advisors held the most valuable stake in BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), which was worth $573.1 million at the end of the fourth quarter. On the second spot was Palo Alto Investors which amassed $166.6 million worth of shares. Avoro Capital Advisors (venBio Select Advisor), Citadel Investment Group, and D E Shaw 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 Copernicus Capital Management allocated the biggest weight to BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), around 12.2% of its 13F portfolio. Palo Alto Investors is also relatively very bullish on the stock, earmarking 9.49 percent of its 13F equity portfolio to BMRN.
Seeing as BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) has experienced falling interest from the aggregate hedge fund industry, it's easy to see that there lies a certain "tier" of money managers that slashed their entire stakes in the first quarter. Interestingly, Christopher James's Partner Fund Management said goodbye to the largest stake of the 750 funds monitored by Insider Monkey, worth about $27.6 million in stock. Stanley Druckenmiller's fund, Duquesne Capital, also dumped its stock, about $16.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 8 funds in the first quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) but similarly valued. These stocks are Williams-Sonoma, Inc. (NYSE:WSM), WestRock Company (NYSE:WRK), Loews Corporation (NYSE:L), NICE Ltd (NASDAQ:NICE), Molina Healthcare, Inc. (NYSE:MOH), The Scotts Miracle-Gro Company (NYSE:SMG), and Dynatrace, Inc. (NYSE:DT). All of these stocks' market caps are similar to BMRN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WSM,29,758326,0 WRK,27,580223,-16 L,21,200364,2 NICE,33,868132,7 MOH,31,1561071,4 SMG,34,445170,5 DT,52,1638106,-1 Average,32.4,864485,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $864 million. That figure was $1269 million in BMRN's case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 21 bullish hedge fund positions. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BMRN is 56.4. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on BMRN, though not to the same extent, as the stock returned 8.5% since Q1 (through June 18th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.