Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
BioLife Solutions, Inc. (NASDAQ:BLFS) investors should pay attention to a decrease in hedge fund sentiment recently. BLFS was in 11 hedge funds' portfolios at the end of September. There were 13 hedge funds in our database with BLFS holdings at the end of the previous quarter. Our calculations also showed that BLFS 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.
To the average investor there are dozens of methods stock market investors can use to appraise their holdings. A couple of the most under-the-radar methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top fund managers can outclass their index-focused peers by a very impressive amount (see the details here).
[caption id="attachment_69704" align="alignnone" width="600"] Andrew Sandler of Sandler Capital 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 based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to analyze the recent hedge fund action encompassing BioLife Solutions, Inc. (NASDAQ:BLFS).
How are hedge funds trading BioLife Solutions, Inc. (NASDAQ:BLFS)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the second quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in BLFS a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Casdin Capital, managed by Eli Casdin, holds the biggest position in BioLife Solutions, Inc. (NASDAQ:BLFS). Casdin Capital has a $40.4 million position in the stock, comprising 4% of its 13F portfolio. Coming in second is Park West Asset Management, led by Peter S. Park, holding a $13.1 million position; 0.6% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions contain Andrew Sandler's Sandler Capital Management, Richard Driehaus's Driehaus Capital and Thomas E. Claugus's GMT Capital. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to BioLife Solutions, Inc. (NASDAQ:BLFS), around 4.04% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, designating 0.91 percent of its 13F equity portfolio to BLFS.
Judging by the fact that BioLife Solutions, Inc. (NASDAQ:BLFS) has faced falling interest from the smart money, it's easy to see that there lies a certain "tier" of money managers who sold off their positions entirely last quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $0.7 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund cut about $0.7 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BioLife Solutions, Inc. (NASDAQ:BLFS) but similarly valued. We will take a look at Cyclerion Therapeutics, Inc. (NASDAQ:CYCN), Daktronics, Inc. (NASDAQ:DAKT), Rafael Holdings, Inc. (NYSE:RFL), and CRA International, Inc. (NASDAQ:CRAI). All of these stocks' market caps resemble BLFS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CYCN,14,79668,-3 DAKT,14,22464,5 RFL,6,40913,0 CRAI,15,45421,1 Average,12.25,47117,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $82 million in BLFS's case. CRA International, Inc. (NASDAQ:CRAI) is the most popular stock in this table. On the other hand Rafael Holdings, Inc. (NYSE:RFL) is the least popular one with only 6 bullish hedge fund positions. BioLife Solutions, Inc. (NASDAQ:BLFS) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BLFS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BLFS investors were disappointed as the stock returned 0.7% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.