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Did Hedge Funds Make The Right Call On Bio-Rad Laboratories, Inc. (BIO) ?

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 Bio-Rad Laboratories, Inc. (NYSE:BIO) and determine whether hedge funds had an edge regarding this stock.

Bio-Rad Laboratories, Inc. (NYSE:BIO) has experienced a decrease in hedge fund interest lately. BIO was in 39 hedge funds’ portfolios at the end of the first quarter of 2020. There were 44 hedge funds in our database with BIO positions at the end of the previous quarter. Our calculations also showed that BIO isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

According to most investors, hedge funds are perceived as unimportant, outdated investment vehicles of the past. While there are greater than 8000 funds trading at present, Our experts look at the upper echelon of this group, around 850 funds. Most estimates calculate that this group of people direct the majority of all hedge funds’ total asset base, and by watching their finest picks, Insider Monkey has revealed several investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Steven Cohen

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to check out the fresh hedge fund action regarding Bio-Rad Laboratories, Inc. (NYSE:BIO).

What does smart money think about Bio-Rad Laboratories, Inc. (NYSE:BIO)?

At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the fourth quarter of 2019. On the other hand, there were a total of 37 hedge funds with a bullish position in BIO a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is BIO A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Bio-Rad Laboratories, Inc. (NYSE:BIO), which was worth $134.6 million at the end of the third quarter. On the second spot was Intermede Investment Partners which amassed $75.9 million worth of shares. Fisher Asset Management, Polar Capital, and Pelham Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to Bio-Rad Laboratories, Inc. (NYSE:BIO), around 9.34% of its 13F portfolio. Tamarack Capital Management is also relatively very bullish on the stock, dishing out 5.31 percent of its 13F equity portfolio to BIO.

Judging by the fact that Bio-Rad Laboratories, Inc. (NYSE:BIO) has experienced bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds that elected to cut their full holdings in the first quarter. Interestingly, Paolo Mortarotti’s Tower House Partners said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth about $60.5 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $12.9 million worth. These moves are interesting, as aggregate hedge fund interest fell by 5 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Bio-Rad Laboratories, Inc. (NYSE:BIO) but similarly valued. We will take a look at Equity Lifestyle Properties, Inc. (NYSE:ELS), DISH Network Corp. (NASDAQ:DISH), POSCO (NYSE:PKX), and Vipshop Holdings Limited (NYSE:VIPS). This group of stocks’ market values match BIO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ELS 31 452058 8
DISH 44 862996 3
PKX 11 40514 1
VIPS 30 553863 3
Average 29 477358 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $477 million. That figure was $875 million in BIO’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 11 bullish hedge fund positions. Bio-Rad Laboratories, Inc. (NYSE:BIO) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on BIO as the stock returned 28.8% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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