There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze bluebird bio Inc (NASDAQ:BLUE).
Is bluebird bio Inc (NASDAQ:BLUE) a bargain? The smart money is in a bullish mood. The number of bullish hedge fund positions improved by 3 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Seadrill Ltd (NYSE:SDRL), Infinera Corp. (NASDAQ:INFN), and Travelport Worldwide Ltd (NYSE:TVPT) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
How have hedgies been trading bluebird bio Inc (NASDAQ:BLUE)?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 14% from the second quarter of 2016. Hedge fund ownership has failed to fully rebound from a steep drop in Q4 2015 however. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Samuel Isaly’s OrbiMed Advisors has the number one position in bluebird bio Inc (NASDAQ:BLUE), worth close to $80.4 million. The second most bullish fund manager is Israel Englander of Millennium Management, with a $44.3 million position. Remaining members of the smart money with similar optimism contain Dmitry Balyasny’s Balyasny Asset Management, Julian Baker and Felix Baker’s Baker Bros. Advisors and John Burbank’s Passport Capital.
As aggregate interest increased, key hedge funds have been driving this bullishness. Passport Capital initiated the most valuable position in bluebird bio Inc (NASDAQ:BLUE). Passport Capital had $19.6 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also made a $10.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Hal Mintz’s Sabby Capital, Ken Griffin’s Citadel Investment Group, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks similar to bluebird bio Inc (NASDAQ:BLUE). These stocks are Seadrill Ltd (NYSE:SDRL), Infinera Corp. (NASDAQ:INFN), Travelport Worldwide Ltd (NYSE:TVPT), and CBL & Associates Properties, Inc. (NYSE:CBL). All of these stocks’ market caps are closest to BLUE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $283 million in BLUE’s case. Travelport Worldwide Ltd (NYSE:TVPT) is the most popular stock in this table. On the other hand CBL & Associates Properties, Inc. (NYSE:CBL) is the least popular one with only 11 bullish hedge fund positions. bluebird bio Inc (NASDAQ:BLUE) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal, as is the gradually rebounding hedge fund ownership. Thus, BLUE might be a decent candidate to consider a long position in.