Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Bellerophon Therapeutics, Inc. (NASDAQ:BLPH)? The smart money sentiment can provide an answer to this question.
Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) shareholders have witnessed an increase in hedge fund sentiment lately. Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. Our calculations also showed that BLPH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. Now we’re going to take a look at the key hedge fund action regarding Bellerophon Therapeutics, Inc. (NASDAQ:BLPH).
How have hedgies been trading Bellerophon Therapeutics, Inc. (NASDAQ:BLPH)?
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 33% from the second quarter of 2020. By comparison, 5 hedge funds held shares or bullish call options in BLPH 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.
According to Insider Monkey’s hedge fund database, Puissance Capital Managementá, managed by Ted Wang, holds the number one position in Bellerophon Therapeutics, Inc. (NASDAQ:BLPH). Puissance Capital Managementá has a $11.7 million position in the stock, comprising 67.7% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, which holds a $2.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Cliff Asness’s AQR Capital Management, David Harding’s Winton Capital Management and . In terms of the portfolio weights assigned to each position Puissance Capital Managementá allocated the biggest weight to Bellerophon Therapeutics, Inc. (NASDAQ:BLPH), around 67.74% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.0041 percent of its 13F equity portfolio to BLPH.
Consequently, some big names were breaking ground themselves. AQR Capital Management, managed by Cliff Asness, assembled the biggest position in Bellerophon Therapeutics, Inc. (NASDAQ:BLPH). AQR Capital Management had $0.3 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.1 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) but similarly valued. We will take a look at CVR Partners LP (NYSE:UAN), O2Micro International Limited (NASDAQ:OIIM), Park City Group, Inc. (NASDAQ:PCYG), Senseonics Holdings, Inc. (NYSE:SENS), EMCORE Corporation (NASDAQ:EMKR), Tarena International Inc (NASDAQ:TEDU), and Newpark Resources Inc (NYSE:NR). This group of stocks’ market valuations match BLPH’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 6.4 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $15 million in BLPH’s case. Newpark Resources Inc (NYSE:NR) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 2 bullish hedge fund positions. Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BLPH is 33.7. 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and surpassed the market again by 16.1 percentage points. Unfortunately BLPH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BLPH investors were disappointed as the stock returned -34% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.