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Hedge Funds Souring On BioSpecifics Technologies Corp. (BSTC)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of BioSpecifics Technologies Corp. (NASDAQ:BSTC).

BioSpecifics Technologies Corp. (NASDAQ:BSTC) has experienced a decrease in hedge fund interest of late. BSTC was in 9 hedge funds’ portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with BSTC positions at the end of the previous quarter. Our calculations also showed that BSTC 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.

To most stock holders, hedge funds are assumed to be unimportant, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers look at the bigwigs of this group, approximately 850 funds. These hedge fund managers direct most of the hedge fund industry’s total capital, and by paying attention to their matchless picks, Insider Monkey has found numerous investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the top 15 defense contractors in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action surrounding BioSpecifics Technologies Corp. (NASDAQ:BSTC).

What does smart money think about BioSpecifics Technologies Corp. (NASDAQ:BSTC)?

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the fourth quarter of 2019. On the other hand, there were a total of 12 hedge funds with a bullish position in BSTC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the biggest position in BioSpecifics Technologies Corp. (NASDAQ:BSTC). Renaissance Technologies has a $30.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Royce & Associates, managed by Chuck Royce, which holds a $7.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism comprise Cliff Asness’s AQR Capital Management, Noam Gottesman’s GLG Partners and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to BioSpecifics Technologies Corp. (NASDAQ:BSTC), around 0.11% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to BSTC.

Because BioSpecifics Technologies Corp. (NASDAQ:BSTC) has experienced falling interest from the aggregate hedge fund industry, we can see that there exists a select few hedgies that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest stake of all the hedgies watched by Insider Monkey, worth close to $0.8 million in stock. Roger Ibbotson’s fund, Zebra Capital Management, also cut its stock, about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BioSpecifics Technologies Corp. (NASDAQ:BSTC) but similarly valued. These stocks are First Community Bankshares, Inc. (NASDAQ:FCBC), AxoGen, Inc. (NASDAQ:AXGN), Prevail Therapeutics Inc. (NASDAQ:PRVL), and Vericel Corp (NASDAQ:VCEL). This group of stocks’ market values resemble BSTC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FCBC 5 8715 -2
AXGN 10 62386 -5
PRVL 12 269275 4
VCEL 18 70625 -7
Average 11.25 102750 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $103 million. That figure was $53 million in BSTC’s case. Vericel Corp (NASDAQ:VCEL) is the most popular stock in this table. On the other hand First Community Bankshares, Inc. (NASDAQ:FCBC) is the least popular one with only 5 bullish hedge fund positions. BioSpecifics Technologies Corp. (NASDAQ:BSTC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately BSTC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BSTC investors were disappointed as the stock returned 9.3% during 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.