In this article you are going to find out whether hedge funds think Beam Therapeutics Inc. (NASDAQ:BEAM) 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 BEAM a good stock to buy now? Beam Therapeutics Inc. (NASDAQ:BEAM) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. Beam Therapeutics Inc. (NASDAQ:BEAM) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 11. There were 10 hedge funds in our database with BEAM positions at the end of the second quarter. Our calculations also showed that BEAM 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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 we’re going to analyze the recent hedge fund action regarding Beam Therapeutics Inc. (NASDAQ:BEAM).
What have hedge funds been doing with Beam Therapeutics Inc. (NASDAQ:BEAM)?
At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in BEAM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Beam Therapeutics Inc. (NASDAQ:BEAM) was held by Redmile Group, which reported holding $81.9 million worth of stock at the end of September. It was followed by Hillhouse Capital Management with a $73 million position. Other investors bullish on the company included Cormorant Asset Management, Alkeon Capital Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Redmile Group allocated the biggest weight to Beam Therapeutics Inc. (NASDAQ:BEAM), around 1.5% of its 13F portfolio. Cormorant Asset Management is also relatively very bullish on the stock, setting aside 0.75 percent of its 13F equity portfolio to BEAM.
Because Beam Therapeutics Inc. (NASDAQ:BEAM) has faced a decline in interest from hedge fund managers, we can see that there exists a select few funds that decided to sell off their full holdings heading into Q4. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $10 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $9.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Beam Therapeutics Inc. (NASDAQ:BEAM) but similarly valued. We will take a look at Adtalem Global Education Inc. (NYSE:ATGE), Black Stone Minerals LP (NYSE:BSM), The RealReal, Inc. (NASDAQ:REAL), Myovant Sciences Ltd. (NYSE:MYOV), Silvercorp Metals Inc. (NYSE:SVM), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), and Avaya Holdings Corp. (NYSE:AVYA). All of these stocks’ market caps match BEAM’s market cap.
|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 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $194 million in BEAM’s case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 4 bullish hedge fund positions. Beam Therapeutics Inc. (NASDAQ:BEAM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BEAM is 26.1. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on BEAM as the stock returned 132.4% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.