Is bluebird bio Inc (BLUE) Going to Burn These Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2019. What do these smart investors think about bluebird bio Inc (NASDAQ:BLUE)?

bluebird bio Inc (NASDAQ:BLUE) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. BLUE was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. There were 22 hedge funds in our database with BLUE holdings at the end of the previous quarter. Our calculations also showed that BLUE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are viewed as underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, Our experts hone in on the elite of this group, around 750 funds. It is estimated that this group of investors manage the lion’s share of all hedge funds’ total capital, and by shadowing their highest performing picks, Insider Monkey has found several investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s view the fresh hedge fund action encompassing bluebird bio Inc (NASDAQ:BLUE).

How have hedgies been trading bluebird bio Inc (NASDAQ:BLUE)?

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BLUE over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BLUE A Good Stock To Buy?

The largest stake in bluebird bio Inc (NASDAQ:BLUE) was held by Casdin Capital, which reported holding $56.2 million worth of stock at the end of September. It was followed by Healthcor Management with a $46.6 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Rock Springs Capital Management. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to bluebird bio Inc (NASDAQ:BLUE), around 5.63% of its 13F portfolio. Healthcor Management is also relatively very bullish on the stock, earmarking 1.76 percent of its 13F equity portfolio to BLUE.

Because bluebird bio Inc (NASDAQ:BLUE) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds that slashed their full holdings in the third quarter. It’s worth mentioning that Steven Boyd’s Armistice Capital sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising about $12.7 million in stock. Sander Gerber’s fund, Hudson Bay Capital Management, also said goodbye to its stock, about $5.7 million worth. These moves are interesting, as total hedge fund interest was cut by 6 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as bluebird bio Inc (NASDAQ:BLUE) but similarly valued. These stocks are ONE Gas Inc (NYSE:OGS), Globus Medical Inc (NYSE:GMED), First Horizon National Corporation (NYSE:FHN), and TFS Financial Corporation (NASDAQ:TFSL). This group of stocks’ market values are similar to BLUE’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OGS 17 95793 3
GMED 21 258701 2
FHN 31 192889 8
TFSL 8 157723 3
Average 19.25 176277 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $176 million. That figure was $146 million in BLUE’s case. First Horizon National Corporation (NYSE:FHN) is the most popular stock in this table. On the other hand TFS Financial Corporation (NASDAQ:TFSL) is the least popular one with only 8 bullish hedge fund positions. bluebird bio Inc (NASDAQ:BLUE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BLUE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BLUE investors were disappointed as the stock returned -11.8% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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