Is BBIO A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think BridgeBio Pharma, Inc. (NASDAQ:BBIO) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is BBIO a good stock to buy now? BridgeBio Pharma, Inc. (NASDAQ:BBIO) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 14. BBIO shareholders have witnessed a decrease in hedge fund interest recently. There were 14 hedge funds in our database with BBIO holdings at the end of June. Our calculations also showed that BBIO 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.

Lei Zhang Hillhouse Capital

Lei Zhang of Hillhouse Capital Management

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 15 best blue chip stocks 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. Keeping this in mind let’s go over the key hedge fund action regarding BridgeBio Pharma, Inc. (NASDAQ:BBIO).

Do Hedge Funds Think BBIO Is A Good Stock To Buy Now?

At the end of September, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in BBIO a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is BBIO A Good Stock To Buy?

The largest stake in BridgeBio Pharma, Inc. (NASDAQ:BBIO) was held by Viking Global, which reported holding $998.8 million worth of stock at the end of September. It was followed by Perceptive Advisors with a $251.6 million position. Other investors bullish on the company included Hillhouse Capital Management, Cormorant Asset Management, and GLG Partners. In terms of the portfolio weights assigned to each position Perceptive Advisors allocated the biggest weight to BridgeBio Pharma, Inc. (NASDAQ:BBIO), around 3.67% of its 13F portfolio. Viking Global is also relatively very bullish on the stock, dishing out 3.61 percent of its 13F equity portfolio to BBIO.

Due to the fact that BridgeBio Pharma, Inc. (NASDAQ:BBIO) has experienced falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of money managers who were dropping their entire stakes in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $1.3 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also said goodbye to its stock, about $0.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to BridgeBio Pharma, Inc. (NASDAQ:BBIO). We will take a look at Zai Lab Limited (NASDAQ:ZLAB), Science Applications International Corp (NYSE:SAIC), Stag Industrial Inc (NYSE:STAG), Hutchison China MediTech Limited (NASDAQ:HCM), DXC Technology Company (NYSE:DXC), Alaska Air Group, Inc. (NYSE:ALK), and Grupo Aeroportuario del Pacifico (NYSE:PAC). All of these stocks’ market caps are similar to BBIO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ZLAB 28 356502 1
SAIC 21 223187 -14
STAG 19 77620 5
HCM 5 34753 -2
DXC 37 618363 -3
ALK 34 386136 5
PAC 6 94098 -1
Average 21.4 255808 -1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.4 hedge funds with bullish positions and the average amount invested in these stocks was $256 million. That figure was $1528 million in BBIO’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 5 bullish hedge fund positions. BridgeBio Pharma, Inc. (NASDAQ:BBIO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BBIO is 44.4. 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 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on BBIO as the stock returned 51% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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