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Is BeiGene, Ltd. (BGNE) Going to Burn These Hedge Funds?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Is BeiGene, Ltd. (NASDAQ:BGNE) a bargain? Prominent investors are betting on the stock. The number of bullish hedge fund bets inched up by 2 in recent months. Our calculations also showed that BGNE isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Lei Zhang Hillhouse Capital

Let’s view the latest hedge fund action regarding BeiGene, Ltd. (NASDAQ:BGNE).

How are hedge funds trading BeiGene, Ltd. (NASDAQ:BGNE)?

Heading into the fourth quarter of 2018, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in BGNE at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BGNE_dec2018

According to Insider Monkey’s hedge fund database, Julian Baker and Felix Baker’s Baker Bros. Advisors has the number one position in BeiGene, Ltd. (NASDAQ:BGNE), worth close to $2.0597 billion, corresponding to 13.6% of its total 13F portfolio. On Baker Bros. Advisors’s heels is Hillhouse Capital Management, led by Lei Zhang, holding a $942.4 million position; the fund has 25% of its 13F portfolio invested in the stock. Other peers that hold long positions include Samuel Isaly’s OrbiMed Advisors, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management and David Kowitz and Sheldon Kasowitz’s Indus Capital.

As industrywide interest jumped, key money managers have jumped into BeiGene, Ltd. (NASDAQ:BGNE) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the most outsized position in BeiGene, Ltd. (NASDAQ:BGNE). Marshall Wace LLP had $6.4 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also initiated a $1.7 million position during the quarter. The other funds with brand new BGNE positions are Seth Fischer’s Oasis Management, Mike Vranos’s Ellington, and David Costen Haley’s HBK Investments.

Let’s also examine hedge fund activity in other stocks similar to BeiGene, Ltd. (NASDAQ:BGNE). These stocks are Jazz Pharmaceuticals plc (NASDAQ:JAZZ), Duke Realty Corporation (NYSE:DRE), Westinghouse Air Brake Technologies Corp (NYSE:WAB), and LINE Corporation (NYSE:LN). This group of stocks’ market values are closest to BGNE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
JAZZ 29 1005592 2
DRE 16 343282 -6
WAB 18 600559 4
LN 5 127221 1
Average 17 519164 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $519 million. That figure was $3.22 billion in BGNE’s case. Jazz Pharmaceuticals plc (NASDAQ:JAZZ) is the most popular stock in this table. On the other hand LINE Corporation (NYSE:LN) is the least popular one with only 5 bullish hedge fund positions. BeiGene, Ltd. (NASDAQ:BGNE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard JAZZ might be a better candidate to consider a long position.

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

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