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Did Hedge Funds Drop The Ball On China Biologic Products Holdings, Inc. (CBPO) ?

Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 20% in 2019 (through September 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 24% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like China Biologic Products Holdings, Inc. (NASDAQ:CBPO).

China Biologic Products Holdings, Inc. (NASDAQ:CBPO) investors should pay attention to an increase in support from the world’s most elite money managers of late. CBPO was in 9 hedge funds’ portfolios at the end of the second quarter of 2019. There were 8 hedge funds in our database with CBPO positions at the end of the previous quarter. Our calculations also showed that CBPO isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

YORK CAPITAL MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the new hedge fund action surrounding China Biologic Products Holdings, Inc. (NASDAQ:CBPO).

What have hedge funds been doing with China Biologic Products Holdings, Inc. (NASDAQ:CBPO)?

At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CBPO over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CBPO Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, York Capital Management, managed by James Dinan, holds the largest position in China Biologic Products Holdings, Inc. (NASDAQ:CBPO). York Capital Management has a $107.6 million position in the stock, comprising 4.4% of its 13F portfolio. The second largest stake is held by Maso Capital, managed by Manoj JaináandáSohit Khurana, which holds a $14.4 million position; 7.5% of its 13F portfolio is allocated to the company. Other members of the smart money that hold long positions consist of Gifford Combs’s Dalton Investments, Steve Cohen’s Point72 Asset Management and Matthew Hulsizer’s PEAK6 Capital Management.

Consequently, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in China Biologic Products Holdings, Inc. (NASDAQ:CBPO). Point72 Asset Management had $6.5 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.7 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks similar to China Biologic Products Holdings, Inc. (NASDAQ:CBPO). These stocks are Tandem Diabetes Care Inc (NASDAQ:TNDM), Univar Solutions Inc. (NYSE:UNVR), Outfront Media Inc (NYSE:OUT), and Pebblebrook Hotel Trust (NYSE:PEB). This group of stocks’ market caps resemble CBPO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TNDM 33 485692 0
UNVR 31 1301531 -11
OUT 22 343646 -3
PEB 13 98272 3
Average 24.75 557285 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $557 million. That figure was $145 million in CBPO’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Pebblebrook Hotel Trust (NYSE:PEB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks China Biologic Products Holdings, Inc. (NASDAQ:CBPO) is even less popular than PEB. Hedge funds clearly dropped the ball on CBPO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on CBPO as the stock returned 20.1% during the third quarter and outperformed the market by an even larger margin.

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

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