Baron Funds: “We Retain Conviction in BridgeBio (BBIO)”

Baron Funds, an asset management firm, published its “Baron Health Care Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A return of 11.43% was delivered by the fund’s institutional shares for the Q2 of 2021, outperforming both its S&P 500 and Russell 3000 Health Care benchmarks that delivered 8.55% and 8.16% returns respectively for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.

In the Q2 2021 investor letter of Baron Funds, the fund mentioned BridgeBio Pharma, Inc. (NASDAQ: BBIO) and discussed its stance on the firm. BridgeBio Pharma, Inc. is a Palo Alto, California-based biotechnology company with a $7.5 billion market capitalization. BBIO delivered a -29.52% return since the beginning of the year, while its 12-month returns are up by 75.67%. The stock closed at $50.12 per share on August 13, 2021.

Here is what Baron Funds has to say about BridgeBio Pharma, Inc. in its Q2 2021 investor letter:

BridgeBio Pharma, Inc. is a biotechnology company developing drugs that address a host of genetic disorders. Shares fell in the quarter given concerns around increasing competition. While we expect positive results from BridgeBio’s Phase 3 trial for its lead program for TTR amyloidosis, a disease in which toxic proteins build up in the heart and nerves, updates from Alnylam’s competing drug, Vitrusiran, and more recently, Intellia’s gene editing platform, pressured the stock. We retain conviction in BridgeBio given its pipeline and diversified business model.”


Based on our calculations, BridgeBio Pharma, Inc. (NASDAQ: BBIO) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. BBIO was in 26 hedge fund portfolios at the end of the first quarter of 2021, compared to 23 funds in the fourth quarter of 2020. BridgeBio Pharma, Inc. (NASDAQ: BBIO) delivered a -6.60% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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