Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
bluebird bio Inc (NASDAQ:BLUE) was in 28 hedge funds’ portfolios at the end of September. BLUE has experienced a decrease in activity from the world’s largest hedge funds of late. There were 41 hedge funds in our database with BLUE positions at the end of the previous quarter. At the end of this article we will also compare BLUE to other stocks, including Pool Corporation (NASDAQ:POOL), Veeva Systems Inc (NYSE:VEEV), and ViaSat, Inc. (NASDAQ:VSAT) to get a better sense of its popularity.
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If you’d ask most traders, hedge funds are perceived as slow, old investment tools of years past. While there are over 8000 funds trading today, Our researchers choose to focus on the masters of this group, about 700 funds. These money managers have their hands on most of the hedge fund industry’s total asset base, and by tailing their inimitable picks, Insider Monkey has figured out a few investment strategies that have historically defeated the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, we’re going to analyze the recent action regarding bluebird bio Inc (NASDAQ:BLUE).
How have hedgies been trading bluebird bio Inc (NASDAQ:BLUE)?
At the Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the largest position in bluebird bio Inc (NASDAQ:BLUE), worth close to $101.7 million, comprising 1% of its total 13F portfolio. The second most bullish fund manager is Viking Global, led by Andreas Halvorsen, holding an $52.7 million position; 0.2% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions consist of James E. Flynn’s Deerfield Management, Steve Cohen’s Point72 Asset Management and Peter Kolchinsky’s RA Capital Management.
Due to the fact that bluebird bio Inc (NASDAQ:BLUE) has faced bearish sentiment from the smart money, logic holds that there was a specific group of funds that decided to sell off their positions entirely last quarter. At the top of the heap, Jason Karp’s Tourbillon Capital Partners dropped the largest position of the 700 funds followed by Insider Monkey, worth close to $42.1 million in stock, and John Burbank’s Passport Capital was right behind this move, as the fund said goodbye to about $36.2 million worth of shares. These moves are intriguing to say the least, as total hedge fund interest dropped by 13 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as bluebird bio Inc (NASDAQ:BLUE) but similarly valued. We will take a look at Pool Corporation (NASDAQ:POOL), Veeva Systems Inc (NYSE:VEEV), ViaSat, Inc. (NASDAQ:VSAT), and Hawaiian Electric Industries, Inc. (NYSE:HE). All of these stocks’ market caps are closest to BLUE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| POOL | 16 | 166657 | -1 |
| VEEV | 16 | 110492 | 2 |
| VSAT | 12 | 1552133 | -2 |
| HE | 10 | 44851 | 4 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $469 million. That figure was $323 million in BLUE’s case. Pool Corporation (NASDAQ:POOL) and Veeva Systems Inc (NYSE:VEEV) are the most popular stocks in this table. On the other hand Hawaiian Electric Industries, Inc. (NYSE:HE) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks, bluebird bio Inc (NASDAQ:BLUE) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
