Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about BridgeBio Pharma, Inc. (NASDAQ:BBIO).
BridgeBio Pharma, Inc. (NASDAQ:BBIO) investors should be aware of an increase in support from the world's most elite money managers of late. Our calculations also showed that BBIO isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the new hedge fund action surrounding BridgeBio Pharma, Inc. (NASDAQ:BBIO).
How are hedge funds trading BridgeBio Pharma, Inc. (NASDAQ:BBIO)?
At Q2's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14 from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in BBIO over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in BridgeBio Pharma, Inc. (NASDAQ:BBIO) was held by Viking Global, which reported holding $718 million worth of stock at the end of March. It was followed by Perceptive Advisors with a $180.9 million position. Other investors bullish on the company included Cormorant Asset Management, Hillhouse Capital Management, and SCGE Management.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, assembled the most valuable position in BridgeBio Pharma, Inc. (NASDAQ:BBIO). Viking Global had $718 million invested in the company at the end of the quarter. Joseph Edelman's Perceptive Advisors also initiated a $180.9 million position during the quarter. The following funds were also among the new BBIO investors: Bihua Chen's Cormorant Asset Management, Lei Zhang's Hillhouse Capital Management, and Christopher Lyle's SCGE Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as BridgeBio Pharma, Inc. (NASDAQ:BBIO) but similarly valued. We will take a look at Cabot Microelectronics Corporation (NASDAQ:CCMP), FTI Consulting, Inc. (NYSE:FCN), Novanta Inc. (NASDAQ:NOVT), and Viavi Solutions Inc (NASDAQ:VIAV). This group of stocks' market caps resemble BBIO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCMP,13,293721,-4 FCN,17,128300,0 NOVT,13,70468,-4 VIAV,22,293123,-6 Average,16.25,196403,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $196 million. That figure was $1069 million in BBIO's case. Viavi Solutions Inc (NASDAQ:VIAV) is the most popular stock in this table. On the other hand Cabot Microelectronics Corporation (NASDAQ:CCMP) is the least popular one with only 13 bullish hedge fund positions. BridgeBio Pharma, Inc. (NASDAQ:BBIO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BBIO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BBIO investors were disappointed as the stock returned -20.4% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.