We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) and determine whether hedge funds skillfully traded this stock.
Is BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) going to take off soon? Prominent investors were betting on the stock. The number of long hedge fund positions went up by 1 in recent months. BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) was in 26 hedge funds’ portfolios at the end of June. The all time high for this statistics is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BCRX 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). There were 25 hedge funds in our database with BCRX positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 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. 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 website to get excerpts of these letters in your inbox. Now we’re going to review the recent hedge fund action encompassing BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX).
Hedge fund activity in BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX)
At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in BCRX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) was held by Baker Bros. Advisors, which reported holding $65.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $40.4 million position. Other investors bullish on the company included Millennium Management, Eversept Partners, and Deerfield Management. In terms of the portfolio weights assigned to each position DG Capital Management allocated the biggest weight to BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX), around 4.47% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, earmarking 3.73 percent of its 13F equity portfolio to BCRX.
As one would reasonably expect, specific money managers have been driving this bullishness. DG Capital Management, managed by Dov Gertzulin, initiated the largest position in BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX). DG Capital Management had $5.5 million invested in the company at the end of the quarter. Alex Denner’s Sarissa Capital Management also made a $5.1 million investment in the stock during the quarter. The following funds were also among the new BCRX investors: Efrem Kamen’s Pura Vida Investments, Matthew L Pinz’s Pinz Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) but similarly valued. These stocks are Vista Outdoor Inc (NYSE:VSTO), Accelerate Diagnostics Inc (NASDAQ:AXDX), Autolus Therapeutics plc (NASDAQ:AUTL), Amyris Inc (NASDAQ:AMRS), 3D Systems Corporation (NYSE:DDD), Neenah Inc. (NYSE:NP), and i3 Verticals, Inc. (NASDAQ:IIIV). This group of stocks’ market valuations resemble BCRX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $250 million in BCRX’s case. Vista Outdoor Inc (NYSE:VSTO) is the most popular stock in this table. On the other hand i3 Verticals, Inc. (NASDAQ:IIIV) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks BioCryst Pharmaceuticals, Inc. (NASDAQ:BCRX) is more popular among hedge funds. Our overall hedge fund sentiment score for BCRX is 86. 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 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately BCRX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BCRX were disappointed as the stock returned -23.5% since the end of the second quarter 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.