We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Blueprint Medicines Corporation (NASDAQ:BPMC).
Blueprint Medicines Corporation (NASDAQ:BPMC) was in 22 hedge funds' portfolios at the end of the fourth quarter of 2018. BPMC has experienced a decrease in hedge fund sentiment of late. There were 27 hedge funds in our database with BPMC positions at the end of the previous quarter. Our calculations also showed that BPMC isn't among the 30 most popular stocks among hedge funds.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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.
We're going to take a glance at the recent hedge fund action surrounding Blueprint Medicines Corporation (NASDAQ:BPMC).
How are hedge funds trading Blueprint Medicines Corporation (NASDAQ:BPMC)?
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BPMC over the last 14 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Partner Fund Management was the largest shareholder of Blueprint Medicines Corporation (NASDAQ:BPMC), with a stake worth $79.3 million reported as of the end of September. Trailing Partner Fund Management was Viking Global, which amassed a stake valued at $64.7 million. Perceptive Advisors, Casdin Capital, and Biotechnology Value Fund / BVF Inc were also very fond of the stock, giving the stock large weights in their portfolios.
Because Blueprint Medicines Corporation (NASDAQ:BPMC) has faced a decline in interest from hedge fund managers, it's easy to see that there was a specific group of funds that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Lei Zhang's Hillhouse Capital Management dropped the largest investment of the "upper crust" of funds tracked by Insider Monkey, totaling close to $111.7 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund dropped about $4.1 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Blueprint Medicines Corporation (NASDAQ:BPMC) but similarly valued. These stocks are Red Rock Resorts, Inc. (NASDAQ:RRR), Hillenbrand, Inc. (NYSE:HI), Envestnet Inc (NYSE:ENV), and Sensient Technologies Corporation (NYSE:SXT). All of these stocks' market caps match BPMC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RRR,17,304726,-4 HI,18,50059,-2 ENV,12,82671,-1 SXT,15,85054,4 Average,15.5,130628,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $391 million in BPMC's case. Hillenbrand, Inc. (NYSE:HI) is the most popular stock in this table. On the other hand Envestnet Inc (NYSE:ENV) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Blueprint Medicines Corporation (NASDAQ:BPMC) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on BPMC as the stock returned 39.9% 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.