The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Bioceres Crop Solutions Corp. (NYSE:BIOX) and find out how it is affected by hedge funds' moves.
Bioceres Crop Solutions Corp. (NYSE:BIOX) was in 3 hedge funds' portfolios at the end of September. BIOX has seen a decrease in activity from the world's largest hedge funds in recent months. There were 4 hedge funds in our database with BIOX holdings at the end of the previous quarter. Our calculations also showed that BIOX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_735536" align="aligncenter" width="473"] Sander Gerber of Hudson Bay Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now let's take a look at the fresh hedge fund action surrounding Bioceres Crop Solutions Corp. (NYSE:BIOX).
Hedge fund activity in Bioceres Crop Solutions Corp. (NYSE:BIOX)
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BIOX over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Hudson Bay Capital Management was the largest shareholder of Bioceres Crop Solutions Corp. (NYSE:BIOX), with a stake worth $0.2 million reported as of the end of September. Trailing Hudson Bay Capital Management was 683 Capital Partners, which amassed a stake valued at $0.1 million. Bulldog Investors was 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 Bulldog Investors allocated the biggest weight to Bioceres Crop Solutions Corp. (NYSE:BIOX), around 0.01% of its 13F portfolio. 683 Capital Partners is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to BIOX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Owl Creek Asset Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified BIOX as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Bioceres Crop Solutions Corp. (NYSE:BIOX) but similarly valued. We will take a look at MVB Financial Corp. (NASDAQ:MVBF), Akoustis Technologies, Inc. (NASDAQ:AKTS), SeaSpine Holdings Corporation (NASDAQ:SPNE), and Marker Therapeutics, Inc. (NASDAQ:MRKR). This group of stocks' market caps are similar to BIOX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MVBF,4,25454,1 AKTS,6,4784,2 SPNE,7,14269,0 MRKR,9,20168,0 Average,6.5,16169,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $0 million in BIOX's case. Marker Therapeutics, Inc. (NASDAQ:MRKR) is the most popular stock in this table. On the other hand MVB Financial Corp. (NASDAQ:MVBF) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Bioceres Crop Solutions Corp. (NYSE:BIOX) is even less popular than MVBF. Hedge funds dodged a bullet by taking a bearish stance towards BIOX. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BIOX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BIOX investors were disappointed as the stock returned -11.2% during the fourth quarter (through the end of November) 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 among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.