The government requires hedge funds and wealthy investors that crossed the $100 million equity holdings threshold are required to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31. We at Insider Monkey have made an extensive database of nearly 750 of those elite funds and famous investors' filings. In this article, we analyze how these elite funds and prominent investors traded BioSpecifics Technologies Corp. (NASDAQ:BSTC) based on those filings.
BioSpecifics Technologies Corp. (NASDAQ:BSTC) was in 12 hedge funds' portfolios at the end of March. BSTC shareholders have witnessed an increase in hedge fund sentiment of late. There were 10 hedge funds in our database with BSTC positions at the end of the previous quarter. Our calculations also showed that bstc isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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 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.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]
Let's go over the recent hedge fund action regarding BioSpecifics Technologies Corp. (NASDAQ:BSTC).
What have hedge funds been doing with BioSpecifics Technologies Corp. (NASDAQ:BSTC)?
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in BSTC a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of BioSpecifics Technologies Corp. (NASDAQ:BSTC), with a stake worth $35.7 million reported as of the end of March. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $3.8 million. Royce & Associates, GLG Partners, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key money managers were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in BioSpecifics Technologies Corp. (NASDAQ:BSTC). Citadel Investment Group had $0.7 million invested in the company at the end of the quarter. Jeffrey Talpins's Element Capital Management also initiated a $0.3 million position during the quarter. The only other fund with a brand new BSTC position is Peter Muller's PDT Partners.
Let's now review hedge fund activity in other stocks similar to BioSpecifics Technologies Corp. (NASDAQ:BSTC). We will take a look at LAIX Inc. (NYSE:LAIX), City Office REIT Inc (NYSE:CIO), TechTarget Inc (NASDAQ:TTGT), and Fly Leasing Limited (NYSE:FLY). This group of stocks' market valuations are closest to BSTC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LAIX,2,1729,1 CIO,5,22019,-1 TTGT,17,82848,1 FLY,8,35906,-1 Average,8,35626,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $49 million in BSTC's case. TechTarget Inc (NASDAQ:TTGT) is the most popular stock in this table. On the other hand LAIX Inc. (NYSE:LAIX) is the least popular one with only 2 bullish hedge fund positions. BioSpecifics Technologies Corp. (NASDAQ:BSTC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 BSTC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BSTC were disappointed as the stock returned -0.5% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.