Is BioDelivery Sciences International, Inc. (BDSI) A Good Stock To Buy?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards BioDelivery Sciences International, Inc. (NASDAQ:BDSI).

Is BioDelivery Sciences International, Inc. (NASDAQ:BDSI) a good stock to buy? BDSI lost 70% of its value following disappoint BUNAVAIL sales over the last year. In the most recent quarter BDSI managed to bank only $1.2 million in BUNAVAIL sales. Some hedge funds were expecting annual sales of $100-$200 million last year. So the stock price decline is completely understandable. Our calculations sow that BDSI has seen a decrease in activity from the world’s largest hedge funds in recent months. BDSI was in 22 hedge funds’ portfolios at the end of September. There were 23 hedge funds in our database with BDSI holdings at the end of the previous quarter. This is a discouraging sign as hedge funds didn’t think BDSI’s declining price made it an attractive buy. At the end of this article we will also compare BDSI to other stocks including Seabridge Gold, Inc. (USA) (NYSE:SA), National Research Corp (NASDAQ:NRCIA), and Luxfer Holdings PLC (ADR) (NYSE:LXFR) to get a better sense of its popularity.

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Hedge fund activity in BioDelivery Sciences International, Inc. (NASDAQ:BDSI)

Heading into Q4, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Broadfin Capital, managed by Kevin Kotler, holds the largest position in BioDelivery Sciences International, Inc. (NASDAQ:BDSI). Broadfin Capital has a $26.4 million position in the stock, comprising 1.5% of its 13F portfolio. Sitting at the No. 2 spot is Armistice Capital, led by Steven Boyd, holding a $8.2 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Chuck Royce’s Royce & Associates, Richard Driehaus’s Driehaus Capital and James E. Flynn’s Deerfield Management.

Seeing as BioDelivery Sciences International, Inc. (NASDAQ:BDSI) has experienced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few hedge funds that decided to sell off their entire stakes heading into Q4. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management sold off the biggest stake of the 700 funds watched by Insider Monkey, valued at an estimated $6.4 million in stock. Cliff Asness’s fund, AQR Capital Management, also dumped its stock, about $1 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as BioDelivery Sciences International, Inc. (NASDAQ:BDSI) but similarly valued. These stocks are Seabridge Gold, Inc. (USA) (NYSE:SA), National Research Corp (NASDAQ:NRCIA), Luxfer Holdings PLC (ADR) (NYSE:LXFR), and Threshold Pharmaceuticals, Inc. (NASDAQ:THLD). All of these stocks’ market caps are closest to BDSI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SA 6 10438 -2
NRCIA 5 14496 0
LXFR 9 84210 2
THLD 13 31728 4

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $70 million in BDSI’s case. Threshold Pharmaceuticals, Inc. (NASDAQ:THLD) is the most popular stock in this table. On the other hand National Research Corp (NASDAQ:NRCIA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks BioDelivery Sciences International, Inc. (NASDAQ:BDSI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.