Blueprint Medicines (BPMC): Hedge Fund Sentiment Reaches Another All Time High

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Blueprint Medicines Corporation (NASDAQ:BPMC) and determine whether hedge funds had an edge regarding this stock.

Blueprint Medicines Corporation (NASDAQ:BPMC) shareholders have witnessed an increase in hedge fund sentiment recently. Blueprint Medicines Corporation (NASDAQ:BPMC) was in 38 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BPMC 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.

At the moment there are a lot of metrics shareholders use to appraise publicly traded companies. A pair of the most underrated metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outclass the broader indices by a very impressive amount (see the details here).

Andreas Halvorsen

Andreas Halvorsen of Viking Global

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to view the new hedge fund action surrounding Blueprint Medicines Corporation (NASDAQ:BPMC).

What does smart money think about Blueprint Medicines Corporation (NASDAQ:BPMC)?

Heading into the third quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BPMC over the last 20 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is BPMC A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Andreas Halvorsen’s Viking Global has the number one position in Blueprint Medicines Corporation (NASDAQ:BPMC), worth close to $127.1 million, comprising 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is Casdin Capital, managed by Eli Casdin, which holds a $120.9 million position; the fund has 7.2% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Lei Zhang’s Hillhouse Capital Management, Eric Bannasch’s Cadian Capital and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Foresite Capital allocated the biggest weight to Blueprint Medicines Corporation (NASDAQ:BPMC), around 17.31% of its 13F portfolio. Casdin Capital is also relatively very bullish on the stock, earmarking 7.15 percent of its 13F equity portfolio to BPMC.

Consequently, some big names have jumped into Blueprint Medicines Corporation (NASDAQ:BPMC) headfirst. Holocene Advisors, managed by Brandon Haley, assembled the most valuable position in Blueprint Medicines Corporation (NASDAQ:BPMC). Holocene Advisors had $41.1 million invested in the company at the end of the quarter. Marc Schneidman’s Aquilo Capital Management also made a $24.6 million investment in the stock during the quarter. The other funds with brand new BPMC positions are Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management, Neil Shahrestani’s Ikarian Capital, and Louis Bacon’s Moore Global Investments.

Let’s also examine hedge fund activity in other stocks similar to Blueprint Medicines Corporation (NASDAQ:BPMC). We will take a look at Under Armour Inc (NYSE:UA), Starwood Property Trust, Inc. (NYSE:STWD), Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), Youdao, Inc. (NYSE:DAO), Healthequity Inc (NASDAQ:HQY), DXC Technology Company (NYSE:DXC), and Jefferies Financial Group Inc. (NYSE:JEF). All of these stocks’ market caps match BPMC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UA 40 558888 3
STWD 22 168439 -1
NCLH 28 170565 8
DAO 13 381255 7
HQY 18 164752 -1
DXC 40 529806 -1
JEF 37 586275 7
Average 28.3 365711 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $366 million. That figure was $1005 million in BPMC’s case. Under Armour Inc (NYSE:UA) is the most popular stock in this table. On the other hand Youdao, Inc. (NYSE:DAO) is the least popular one with only 13 bullish hedge fund positions. Blueprint Medicines Corporation (NASDAQ:BPMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BPMC is 83.3. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately BPMC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BPMC were disappointed as the stock returned -0.7% during the same time period 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.