Should You Buy iShares NASDAQ Biotechnology Index (ETF) (IBB)?

As industrywide interest jumped, key money managers have been driving this bullishness. LionEye Capital Management, managed by Stephen V. Raneri, assembled the most outsized position in iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB). LionEye Capital Management had $27.3 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also made a $27 million investment in the stock during the quarter. The other funds with brand new IBB positions are Vishal Bhutani and Joshua Bederman’s Pyrrho Capital Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt, and Anthony Bozza’s Lakewood Capital Management.

Let’s also examine hedge fund activity in other stocks similar to iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB). These stocks are AerCap Holdings N.V. (NYSE:AER), Staples, Inc. (NASDAQ:SPLS), Sensata Technologies Holding N.V. (NYSE:ST), and Fibria Celulose SA (ADR) (NYSE:FBR). This group of stocks’ market values are closest to IBB’s market value.

As you can see these stocks had an average of 41.75 hedge funds with bullish positions and the average amount invested in these stocks was $1524 million. That figure was $321 million in IBB’s case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Fibria Celulose SA (ADR) (NYSE:FBR) is the least popular one with only 8 bullish hedge fund positions. iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) 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. In this regard AER might be a better candidate to consider a long position.