Hedge Funds Are Dumping Biohaven Pharmaceutical Holding Company Ltd. (BHVN)

In this article we are going to use hedge fund sentiment as a tool and determine whether Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) a healthy stock for your portfolio? The best stock pickers were in a bearish mood. The number of long hedge fund bets went down by 6 recently. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) was in 33 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 42. Our calculations also showed that BHVN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to review the key hedge fund action encompassing Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN).

Do Hedge Funds Think BHVN Is A Good Stock To Buy Now?

At the end of March, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the fourth quarter of 2020. On the other hand, there were a total of 29 hedge funds with a bullish position in BHVN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Among these funds, Armistice Capital held the most valuable stake in Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), which was worth $68.4 million at the end of the fourth quarter. On the second spot was Polar Capital which amassed $58.9 million worth of shares. Kingdon Capital, Glenview Capital, and Eversept Partners 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 Kingdon Capital allocated the biggest weight to Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), around 6.01% of its 13F portfolio. SilverArc Capital is also relatively very bullish on the stock, setting aside 1.87 percent of its 13F equity portfolio to BHVN.

Judging by the fact that Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) has experienced bearish sentiment from hedge fund managers, logic holds that there were a few funds that elected to cut their entire stakes in the first quarter. It’s worth mentioning that Fred Knoll’s Knoll Capital Management cut the biggest stake of the 750 funds watched by Insider Monkey, comprising about $73.5 million in stock, and Principal Global Investors’s Columbus Circle Investors was right behind this move, as the fund dropped about $35 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 6 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) but similarly valued. These stocks are Sunnova Energy International Inc. (NYSE:NOVA), Ormat Technologies, Inc. (NYSE:ORA), Everbridge, Inc. (NASDAQ:EVBG), Navistar International Corp (NYSE:NAV), Workiva Inc (NYSE:WK), SAGE Therapeutics Inc (NASDAQ:SAGE), and 21Vianet Group Inc (NASDAQ:VNET). This group of stocks’ market values match BHVN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NOVA 26 327923 -6
ORA 17 251963 1
EVBG 49 1083099 13
NAV 21 2077934 -8
WK 22 438709 3
SAGE 27 401401 -2
VNET 30 581185 -3
Average 27.4 737459 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $737 million. That figure was $360 million in BHVN’s case. Everbridge, Inc. (NASDAQ:EVBG) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 17 bullish hedge fund positions. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BHVN is 47.6. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on BHVN as the stock returned 46% since the end of Q1 (through 7/2) 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.