Hedge Funds Welcomed BELLUS Health Inc. (BLU) With Open Arms

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. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. In this article we are going to take a look at smart money sentiment towards BELLUS Health Inc. (NASDAQ:BLU).

BELLUS Health Inc. (NASDAQ:BLU) was in 13 hedge funds’ portfolios at the end of September. BLU has experienced an increase in hedge fund sentiment of late. There were 0 hedge funds in our database with BLU holdings at the end of the previous quarter. Our calculations also showed that BLU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Samuel Isaly - Orbimed Advisors

Samuel Isaly of OrbiMed Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action surrounding BELLUS Health Inc. (NASDAQ:BLU).

How have hedgies been trading BELLUS Health Inc. (NASDAQ:BLU)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13 from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BLU over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, OrbiMed Advisors held the most valuable stake in BELLUS Health Inc. (NASDAQ:BLU), which was worth $45.1 million at the end of the third quarter. On the second spot was Polar Capital which amassed $14 million worth of shares. Adage Capital Management, Citadel Investment Group, and Vivo 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 OrbiMed Advisors allocated the biggest weight to BELLUS Health Inc. (NASDAQ:BLU), around 0.86% of its 13F portfolio. Dorset Management is also relatively very bullish on the stock, designating 0.66 percent of its 13F equity portfolio to BLU.

As industrywide interest jumped, some big names have jumped into BELLUS Health Inc. (NASDAQ:BLU) headfirst. OrbiMed Advisors, managed by Samuel Isaly, initiated the largest position in BELLUS Health Inc. (NASDAQ:BLU). OrbiMed Advisors had $45.1 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also made a $14 million investment in the stock during the quarter. The other funds with brand new BLU positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Ken Griffin’s Citadel Investment Group, and Albert Cha and Frank Kung’s Vivo Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BELLUS Health Inc. (NASDAQ:BLU) but similarly valued. These stocks are PBF Logistics LP (NYSE:PBFX), Aphria Inc. (NYSE:APHA), Transportadora de Gas del Sur SA (NYSE:TGS), and Regenxbio Inc (NASDAQ:RGNX). This group of stocks’ market valuations are similar to BLU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PBFX 1 422 -2
APHA 5 2580 0
TGS 8 15061 -1
RGNX 10 171969 -4
Average 6 47508 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $83 million in BLU’s case. Regenxbio Inc (NASDAQ:RGNX) is the most popular stock in this table. On the other hand PBF Logistics LP (NYSE:PBFX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks BELLUS Health Inc. (NASDAQ:BLU) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BLU, though not to the same extent, as the stock returned 9.5% during the fourth quarter (through the end of November) and outperformed the market as well.

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