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Were Hedge Funds Right About Souring On BioMarin Pharmaceutical Inc. (BMRN)?

Asma UL Husna
·6 min read

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of BioMarin Pharmaceutical Inc. (NASDAQ:BMRN).

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) investors should pay attention to a decrease in hedge fund sentiment of late. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) was in 45 hedge funds' portfolios at the end of June. The all time high for this statistics is 54. There were 54 hedge funds in our database with BMRN positions at the end of the first quarter. Our calculations also showed that BMRN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are viewed as underperforming, old investment vehicles of the past. While there are more than 8000 funds trading at present, Our experts hone in on the moguls of this club, about 850 funds. It is estimated that this group of investors preside over the majority of the hedge fund industry's total capital, and by monitoring their best equity investments, Insider Monkey has unearthed a number of investment strategies that have historically outperformed Mr. Market. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Felix Baker - Baker Bros.
Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let's take a glance at the key hedge fund action regarding BioMarin Pharmaceutical Inc. (NASDAQ:BMRN).

What does smart money think about BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)?

At second quarter's end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BMRN over the last 20 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Julian Baker and Felix Baker's Baker Bros. Advisors has the largest position in BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), worth close to $936.1 million, accounting for 4.1% of its total 13F portfolio. Coming in second is Avoro Capital Advisors (venBio Select Advisor), led by Behzad Aghazadeh, holding a $228.2 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass William Leland Edwards's Palo Alto Investors, Phill Gross and Robert Atchinson's Adage Capital Management and Nancy Zevenbergen's Zevenbergen Capital Investments. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), around 10.41% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 6.74 percent of its 13F equity portfolio to BMRN.

Because BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers that decided to sell off their full holdings in the second quarter. Intriguingly, Andreas Halvorsen's Viking Global sold off the largest investment of the 750 funds watched by Insider Monkey, comprising about $122.8 million in stock, and OrbiMed Advisors was right behind this move, as the fund sold off about $45.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds in the second quarter.

Let's now take a look at hedge fund activity in other stocks similar to BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). We will take a look at Fortinet Inc (NASDAQ:FTNT), Archer Daniels Midland Company (NYSE:ADM), Palo Alto Networks Inc (NYSE:PANW), Genmab A/S (NASDAQ:GMAB), Dollar Tree, Inc. (NASDAQ:DLTR), LyondellBasell Industries NV (NYSE:LYB), and Equity Residential (NYSE:EQR). All of these stocks' market caps match BMRN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTNT,44,1815016,15 ADM,28,606680,-4 PANW,51,3587653,4 GMAB,15,243405,1 DLTR,60,2268495,18 LYB,32,509614,-3 EQR,33,555124,9 Average,37.6,1369427,5.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $1369 million. That figure was $2006 million in BMRN's case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 15 bullish hedge fund positions. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BMRN is 54.3. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately BMRN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BMRN were disappointed as the stock returned -37.1% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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