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Hedge Funds Are Warming Up To Beam Therapeutics Inc. (BEAM)

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  • BEAM

In this article we will analyze whether Beam Therapeutics Inc. (NASDAQ:BEAM) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Beam Therapeutics Inc. (NASDAQ:BEAM) an exceptional investment today? Hedge funds were becoming hopeful. The number of bullish hedge fund bets moved up by 3 in recent months. Beam Therapeutics Inc. (NASDAQ:BEAM) was in 21 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BEAM isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Lei Zhang Hillhouse Capital
Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to take a look at the new hedge fund action surrounding Beam Therapeutics Inc. (NASDAQ:BEAM).

Do Hedge Funds Think BEAM Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in BEAM a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BEAM A Good Stock To Buy?
Is BEAM A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, ARK Investment Management, managed by Catherine D. Wood, holds the biggest position in Beam Therapeutics Inc. (NASDAQ:BEAM). ARK Investment Management has a $831.6 million position in the stock, comprising 1.5% of its 13F portfolio. The second largest stake is held by Redmile Group, managed by Jeremy Green, which holds a $264.2 million position; 3.9% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions include Lei Zhang's Hillhouse Capital Management, Farallon Capital and Eli Casdin's Casdin Capital. In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to Beam Therapeutics Inc. (NASDAQ:BEAM), around 3.91% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, earmarking 2.68 percent of its 13F equity portfolio to BEAM.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Beam Therapeutics Inc. (NASDAQ:BEAM) headfirst. Darwin Global Management, managed by Abhishek Trehan, assembled the largest position in Beam Therapeutics Inc. (NASDAQ:BEAM). Darwin Global Management had $16.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also initiated a $6.7 million position during the quarter. The following funds were also among the new BEAM investors: Doron Breen and Mori Arkin's Sphera Global Healthcare Fund, Matthew Hulsizer's PEAK6 Capital Management, and Efrem Kamen's Pura Vida Investments.

Let's now take a look at hedge fund activity in other stocks similar to Beam Therapeutics Inc. (NASDAQ:BEAM). We will take a look at United Therapeutics Corporation (NASDAQ:UTHR), YETI Holdings, Inc. (NYSE:YETI), Kinross Gold Corporation (NYSE:KGC), Mobile TeleSystems OJSC (NYSE:MBT), Autohome Inc (NYSE:ATHM), Gentex Corporation (NASDAQ:GNTX), and Donaldson Company, Inc. (NYSE:DCI). This group of stocks' market caps are closest to BEAM's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UTHR,45,2334119,3 YETI,34,282409,4 KGC,28,360274,1 MBT,10,293155,-1 ATHM,16,344855,-2 GNTX,34,440659,-1 DCI,21,258723,-7 Average,26.9,616313,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $616 million. That figure was $1772 million in BEAM's case. United Therapeutics Corporation (NASDAQ:UTHR) is the most popular stock in this table. On the other hand Mobile TeleSystems OJSC (NYSE:MBT) is the least popular one with only 10 bullish hedge fund positions. Beam Therapeutics Inc. (NASDAQ:BEAM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BEAM is 53.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately BEAM wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BEAM investors were disappointed as the stock returned -27.2% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.