We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Emergent Biosolutions Inc (NYSE:EBS).
Is Emergent Biosolutions Inc (NYSE:EBS) worth your attention right now? Investors who are in the know are getting more optimistic. The number of bullish hedge fund bets went up by 2 recently. Our calculations also showed that EBS isn't among the 30 most popular stocks among hedge funds (view the video below). EBS was in 13 hedge funds' portfolios at the end of June. There were 11 hedge funds in our database with EBS holdings at the end of the previous quarter. 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 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely 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. We're going to check out the fresh hedge fund action encompassing Emergent Biosolutions Inc (NYSE:EBS).
What does smart money think about Emergent Biosolutions Inc (NYSE:EBS)?
Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EBS over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Emergent Biosolutions Inc (NYSE:EBS), with a stake worth $65.2 million reported as of the end of March. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $31.8 million. Royce & Associates, AQR Capital Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. McKinley Capital Management, managed by Robert B. Gillam, assembled the most outsized position in Emergent Biosolutions Inc (NYSE:EBS). McKinley Capital Management had $4.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $3.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Joel Greenblatt's Gotham Asset Management, John Overdeck and David Siegel's Two Sigma Advisors, and Steve Cohen's Point72 Asset Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Emergent Biosolutions Inc (NYSE:EBS) but similarly valued. We will take a look at First Financial Bancorp (NASDAQ:FFBC), 8x8, Inc. (NYSE:EGHT), Inphi Corporation (NYSE:IPHI), and Revolve Group, Inc. (NYSE:RVLV). This group of stocks' market values resemble EBS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FFBC,8,29058,0 EGHT,20,476772,0 IPHI,26,219588,5 RVLV,15,52196,15 Average,17.25,194404,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $139 million in EBS's case. Inphi Corporation (NYSE:IPHI) is the most popular stock in this table. On the other hand First Financial Bancorp (NASDAQ:FFBC) is the least popular one with only 8 bullish hedge fund positions. Emergent Biosolutions Inc (NYSE:EBS) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on EBS as the stock returned 8.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.