It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a foolproof strategy for generating returns, as even the collective wisdom of top hedge funds gets it wrong sometimes, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.
Is Bioline RX Ltd (NASDAQ:BLRX) a buy here? Money managers are selling. The number of long hedge fund bets were trimmed by 1 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Intec Pharma Ltd (NASDAQ:NTEC), Harvest Natural Resources, Inc. (NYSE:HNR), and TheStreet, Inc. (NASDAQ:TST) to gather more data points.
According to most shareholders, hedge funds are perceived as worthless, outdated financial vehicles of years past. While there are over 8000 funds in operation at the moment, We look at the aristocrats of this group, around 700 funds. It is estimated that this group of investors administer the majority of all hedge funds’ total capital, and by tailing their top picks, Insider Monkey has found various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, let’s take a look at the new action surrounding Bioline RX Ltd (NASDAQ:BLRX).
Hedge fund activity in Bioline RX Ltd (NASDAQ:BLRX)
At Q3’s end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exist a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Rima Senvest Management, managed by Richard Mashaal, holds the most valuable position in Bioline RX Ltd (NASDAQ:BLRX). Rima Senvest Management has an $5.5 million position in the stock, comprising 0.4% of its 13F portfolio. The second largest stake is held by OrbiMed Advisors, led by Samuel Isaly, holding an $1.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish contain Anand Parekh’s Alyeska Investment Group, Israel Englander’s Millennium Management and James A. Silverman’s Opaleye Management.
We view hedge fund activity in the stock unfavorable, but, in this case, there was only a single hedge fund selling its entire position: Broadfin Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified BLRX as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Bioline RX Ltd (NASDAQ:BLRX) but similarly valued. We will take a look at Intec Pharma Ltd (NASDAQ:NTEC), Harvest Natural Resources, Inc. (NYSE:HNR), TheStreet, Inc. (NASDAQ:TST), and GigOptix Inc (NYSEMKT:GIG). This group of stocks’ market values resemble BLRX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $10 million in BLRX’s case. Harvest Natural Resources, Inc. (NYSE:HNR) is the most popular stock in this table. On the other hand, Intec Pharma Ltd (NASDAQ:NTEC) is the least popular one with only 5 bullish hedge fund positions. Bioline RX Ltd (NASDAQ:BLRX) is not the least popular stock in this group, but hedge fund interest is still not impressive enough to spend our time analyzing it. Based on our extensive studies, we consider that the best approach is to focus on analyzing stocks that hedge funds are collectively the fondest of and, in this case, HNR might be a better candidate to consider a long position.