We recently published a list of the 10 Best Mid Cap Biotech Stocks to Buy. In this article, we are going to take a look at where Blueprint Medicines Corporation (NASDAQ:BPMC) stands against the other best mid cap biotech stocks to buy.
Is the Biotech Sector Oversaturated?
On March 6, Jared Holz, Mizuho health care equity strategist, appeared on CNBC’s ‘Power Lunch’ to discuss investing in biotech and the oversaturation in the sector. He said that looking at the denominator of biotech stocks in the public market, we’re standing at the 700-800 range, depending upon the day. Almost a quarter of these have enterprise values in negative territory. That basically means that investors and companies, in some respects, have exhausted options. For any value to be created, it is necessary to shift focus and devise another plan of attack through an asset they don’t currently own, and resuscitate the company.
In some respects, investors and analysts are always looking for a clear pathway for biotech as a sector to perform better. However, Holz said we are in a tough place if a quarter of the index is filled with companies with more cash than the market cap. That is why he suggested, which some people consider somewhat hyperbolic, getting rid of the tail here, as there are too many assets out there.
Thousands of biotech companies are competing against each other for tiny market or revenue opportunities. Holz opined that venture funds should stop making so many companies that end up superseding each other in a few years. It would be helpful to dissolve all the biotech stocks with negative values and return the cash to shareholders.
READ ALSO: 12 Best Diagnostics Stocks to Invest In Right Now and 7 Most Undervalued Biotech Stocks To Invest In.
How Can One Make Money in Biotech?
Biotechs pose a tempting scenario, as a company’s stock could be worth $5 with a potential blockbuster drug in the pipeline that could cure even cancer. The company’s stock could surge to hundreds of dollars if the clinical trial succeeds. However, at the same time, it could plunge down to $0 if the trial doesn’t. Holz thus says that the sector is incredibly tempting, and thousands of investors put their careers on the line daily to attempt to figure this out.
He characterized biotech as one of the only sectors in all of equities where single stock picking is the only way to make money. Building on his years-long experience covering the industry, he said that the index has barely been up since the past decade. It has been essentially flat. Meanwhile, every other index that one can find has doubled or more. Therefore, there is an obvious issue with the broader complex. But if you find the right asset, you can kill it in the sector.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 30 biotech stocks with a market cap between $2 billion and $10 billion. We then selected the top 10 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A doctor examining a patient’s samples in a modern hospital setting.
Blueprint Medicines Corporation (NASDAQ:BPMC)
Market Cap: $5.95 billion
Number of Hedge Fund Holders: 56
Blueprint Medicines Corporation (NASDAQ:BPMC) is a commercial-stage global pharmaceutical company that develops life-changing drugs in two core areas: allergy/inflammation and oncology/hematology. The Company delivers its approved medicines in the US and Europe, including AYVAKIT/AYVAKYT (avapritinib) and PDGFRA Exon 18 mutant GIST.
Analyst Michael Yee from Jefferies maintained a Buy rating on Blueprint Medicines Corporation (NASDAQ:BPMC) on March 21, keeping the price target at $135.00. The rating was based on the company’s solid growth profile, ability to consistently surpass revenue estimates, and focus on rare diseases with limited competition, placing it in a favorable market position.
Blueprint Medicines Corporation’s (NASDAQ:BPMC) pipeline, including the WT KIT ‘808 oral pill, presents considerable upside potential. Its early Phase 1 data has delivered promising results, which the analyst expects to translate to a significant market opportunity across multiple inflammatory indications.
Despite some near-term risks, analysts and investors remain bullish on the stock, anticipating continued strong performance. Its median price target of $93.08 implies an upside of 40.74% from current levels. In another report released on March 17, Wolfe Research also initiated coverage with a Buy rating on the stock with a $132.00 price target.
Overall, BPMC ranks 4th on our list of the best mid cap biotech stocks to buy. While we acknowledge the potential of BPMC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BPMC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center