Is BioXcel Therapeutics, Inc. (NASDAQ:BTAI) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
BioXcel Therapeutics, Inc. (NASDAQ:BTAI) investors should pay attention to an increase in activity from the world's largest hedge funds of late. Our calculations also showed that BTAI 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.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26262" align="aligncenter" width="359"] Steven Cohen of Point72 Asset 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 check out the recent hedge fund action encompassing BioXcel Therapeutics, Inc. (NASDAQ:BTAI).
How have hedgies been trading BioXcel Therapeutics, Inc. (NASDAQ:BTAI)?
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 200% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BTAI over the last 17 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in BioXcel Therapeutics, Inc. (NASDAQ:BTAI) was held by Point72 Asset Management, which reported holding $1.5 million worth of stock at the end of September. It was followed by DAFNA Capital Management with a $0.9 million position. The only other hedge fund that is bullish on the company was Renaissance Technologies.
Now, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, created the largest position in BioXcel Therapeutics, Inc. (NASDAQ:BTAI). Point72 Asset Management had $1.5 million invested in the company at the end of the quarter. Nathan Fischel's DAFNA Capital Management also made a $0.9 million investment in the stock during the quarter.
Let's go over hedge fund activity in other stocks similar to BioXcel Therapeutics, Inc. (NASDAQ:BTAI). We will take a look at HMN Financial, Inc. (NASDAQ:HMNF), Northern Technologies International Corporation (NASDAQ:NTIC), T2 Biosystems Inc (NASDAQ:TTOO), and Gamida Cell Ltd. (NASDAQ:GMDA). This group of stocks' market valuations resemble BTAI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMNF,3,15418,0 NTIC,5,7660,2 TTOO,5,1399,-2 GMDA,6,11160,-1 Average,4.75,8909,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $3 million in BTAI's case. Gamida Cell Ltd. (NASDAQ:GMDA) is the most popular stock in this table. On the other hand HMN Financial, Inc. (NASDAQ:HMNF) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks BioXcel Therapeutics, Inc. (NASDAQ:BTAI) is even less popular than HMNF. Hedge funds dodged a bullet by taking a bearish stance towards BTAI. 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 BTAI wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BTAI investors were disappointed as the stock returned -11.6% 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.