Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged during the first quarter. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 40% and 25% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the first 5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
BioLife Solutions, Inc. (NASDAQ:BLFS) was in 15 hedge funds' portfolios at the end of March. BLFS investors should be aware of an increase in enthusiasm from smart money lately. There were 12 hedge funds in our database with BLFS holdings at the end of the previous quarter. Our calculations also showed that BLFS isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's go over the new hedge fund action encompassing BioLife Solutions, Inc. (NASDAQ:BLFS).
What have hedge funds been doing with BioLife Solutions, Inc. (NASDAQ:BLFS)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the fourth quarter of 2018. By comparison, 4 hedge funds held shares or bullish call options in BLFS a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in BioLife Solutions, Inc. (NASDAQ:BLFS) was held by Casdin Capital, which reported holding $43.4 million worth of stock at the end of March. It was followed by Sandler Capital Management with a $17.3 million position. Other investors bullish on the company included Driehaus Capital, Renaissance Technologies, and Millennium Management.
Now, key hedge funds were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, established the biggest position in BioLife Solutions, Inc. (NASDAQ:BLFS). ExodusPoint Capital had $0.4 million invested in the company at the end of the quarter. Peter S. Park's Park West Asset Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are David Harding's Winton Capital Management and Frederick DiSanto's Ancora Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BioLife Solutions, Inc. (NASDAQ:BLFS) but similarly valued. These stocks are RR Donnelley & Sons Company (NYSE:RRD), MidWestOne Financial Group, Inc. (NASDAQ:MOFG), Adverum Biotechnologies, Inc. (NASDAQ:ADVM), and Endeavour Silver Corp. (NYSE:EXK). All of these stocks' market caps are closest to BLFS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RRD,14,21806,-3 MOFG,6,19475,2 ADVM,12,52296,-5 EXK,7,19804,0 Average,9.75,28345,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $83 million in BLFS's case. RR Donnelley & Sons Company (NYSE:RRD) is the most popular stock in this table. On the other hand MidWestOne Financial Group, Inc. (NASDAQ:MOFG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks BioLife Solutions, Inc. (NASDAQ:BLFS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BLFS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BLFS were disappointed as the stock returned -1.6% during the same period 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.