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BioMarin Pharmaceutical Inc. (BMRN): Hedge Funds Fumbled the Ball

Nina Todic

Does BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Is BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) undervalued? The best stock pickers are betting on the stock. The number of bullish hedge fund positions advanced by 4 in recent months. Our calculations also showed that BMRN isn't among the 30 most popular stocks among hedge funds. BMRN was in 45 hedge funds' portfolios at the end of the second quarter of 2019. There were 41 hedge funds in our database with BMRN positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andreas Halvorsen

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the fresh hedge fund action surrounding BioMarin Pharmaceutical Inc. (NASDAQ:BMRN).

Hedge fund activity in BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)

At the end of the second quarter, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in BMRN over the last 16 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with BMRN Positions

More specifically, Baker Bros. Advisors was the largest shareholder of BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), with a stake worth $650 million reported as of the end of March. Trailing Baker Bros. Advisors was Palo Alto Investors, which amassed a stake valued at $223.2 million. Viking Global, venBio Select Advisor, and Partner Fund Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key money managers have jumped into BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) headfirst. Partner Fund Management, managed by Christopher James, initiated the most valuable position in BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). Partner Fund Management had $178.1 million invested in the company at the end of the quarter. James Dinan's York Capital Management also initiated a $95.6 million position during the quarter. The other funds with brand new BMRN positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Steve Cohen's Point72 Asset Management, and Anand Parekh's Alyeska Investment Group.

Let's now take a look at hedge fund activity in other stocks similar to BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). These stocks are Xylem Inc (NYSE:XYL), DXC Technology Company (NYSE:DXC), Gartner Inc (NYSE:IT), and NetApp Inc. (NASDAQ:NTAP). All of these stocks' market caps match BMRN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XYL,19,674762,6 DXC,41,2116402,-5 IT,17,1005108,2 NTAP,26,907458,2 Average,25.75,1175933,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $1176 million. That figure was $2076 million in BMRN's case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand Gartner Inc (NYSE:IT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BMRN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BMRN were disappointed as the stock returned -21.3% during the third 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 (see the video below) among hedge funds as many of these stocks already outperformed the market in Q3. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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