Is BNR A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think Burning Rock Biotech Limited (NASDAQ:BNR) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is BNR a good stock to buy now? Hedge funds were becoming less hopeful. The number of bullish hedge fund bets were cut by 7 recently. Burning Rock Biotech Limited (NASDAQ:BNR) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 18. Our calculations also showed that BNR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are seen as slow, old investment tools of the past. While there are more than 8000 funds in operation at the moment, Our experts look at the crème de la crème of this group, approximately 850 funds. These investment experts have their hands on most of all hedge funds’ total capital, and by tailing their inimitable equity investments, Insider Monkey has deciphered a number of investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to review the recent hedge fund action surrounding Burning Rock Biotech Limited (NASDAQ:BNR).

Do Hedge Funds Think BNR Is A Good Stock To Buy Now?

At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -39% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BNR over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BNR A Good Stock To Buy?

The largest stake in Burning Rock Biotech Limited (NASDAQ:BNR) was held by OrbiMed Advisors, which reported holding $119 million worth of stock at the end of September. It was followed by Casdin Capital with a $48.2 million position. Other investors bullish on the company included Hudson Bay Capital Management, Hillhouse Capital Management, and Baker Bros. Advisors. In terms of the portfolio weights assigned to each position Casdin Capital allocated the biggest weight to Burning Rock Biotech Limited (NASDAQ:BNR), around 2.16% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, earmarking 1.51 percent of its 13F equity portfolio to BNR.

Due to the fact that Burning Rock Biotech Limited (NASDAQ:BNR) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of money managers that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Bihua Chen’s Cormorant Asset Management said goodbye to the largest stake of the 750 funds watched by Insider Monkey, valued at an estimated $6.8 million in stock, and Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management was right behind this move, as the fund dumped about $5.4 million worth. These moves are important to note, as total hedge fund interest fell by 7 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Burning Rock Biotech Limited (NASDAQ:BNR) but similarly valued. We will take a look at Avnet, Inc. (NYSE:AVT), TeleTech Holdings, Inc. (NASDAQ:TTEC), Insperity Inc (NYSE:NSP), United States Cellular Corporation (NYSE:USM), SINA Corp (NASDAQ:SINA), Afya Limited (NASDAQ:AFYA), and Progyny, Inc. (NASDAQ:PGNY). This group of stocks’ market caps are similar to BNR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVT 31 543982 2
TTEC 14 42342 2
NSP 24 224616 -5
USM 13 92934 -3
SINA 22 176746 6
AFYA 6 52155 0
PGNY 20 116628 1
Average 18.6 178486 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $178 million. That figure was $212 million in BNR’s case. Avnet, Inc. (NYSE:AVT) is the most popular stock in this table. On the other hand Afya Limited (NASDAQ:AFYA) is the least popular one with only 6 bullish hedge fund positions. Burning Rock Biotech Limited (NASDAQ:BNR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BNR is 26.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and surpassed the market again by 16.2 percentage points. Unfortunately BNR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BNR investors were disappointed as the stock returned 2.9% since the end of September (through 12/8) 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 most of these stocks already outperformed the market in 2020.

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