While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding BioXcel Therapeutics, Inc. (NASDAQ:BTAI).
Is BTAI a good stock to buy now? Money managers were taking a bearish view. The number of bullish hedge fund positions were trimmed by 2 recently. BioXcel Therapeutics, Inc. (NASDAQ:BTAI) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 13. Our calculations also showed that BTAI 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). There were 13 hedge funds in our database with BTAI positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 let’s take a peek at the key hedge fund action surrounding BioXcel Therapeutics, Inc. (NASDAQ:BTAI).
Do Hedge Funds Think BTAI Is A Good Stock To Buy Now?
At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BTAI 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.
More specifically, Citadel Investment Group was the largest shareholder of BioXcel Therapeutics, Inc. (NASDAQ:BTAI), with a stake worth $32.5 million reported as of the end of September. Trailing Citadel Investment Group was Logos Capital, which amassed a stake valued at $23.8 million. Sphera Global Healthcare Fund, Ikarian Capital, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Logos Capital allocated the biggest weight to BioXcel Therapeutics, Inc. (NASDAQ:BTAI), around 3.15% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, setting aside 1.15 percent of its 13F equity portfolio to BTAI.
Judging by the fact that BioXcel Therapeutics, Inc. (NASDAQ:BTAI) has faced a decline in interest from hedge fund managers, we can see that there is a sect of funds that elected to cut their entire stakes heading into Q4. Intriguingly, Manfred Yu’s Acuta Capital Partners said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at close to $18.1 million in stock, and Renaissance Technologies was right behind this move, as the fund dropped about $8.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to BioXcel Therapeutics, Inc. (NASDAQ:BTAI). We will take a look at Waddell & Reed Financial, Inc. (NYSE:WDR), Matador Resources Co (NYSE:MTDR), New York Mortgage Trust, Inc. (NASDAQ:NYMT), Atara Biotherapeutics Inc (NASDAQ:ATRA), Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), The Greenbrier Companies Inc (NYSE:GBX), and Oak Street Health, Inc. (NYSE:OSH). All of these stocks’ market caps are closest to BTAI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $204 million. That figure was $75 million in BTAI’s case. Constellation Pharmaceuticals, Inc. (NASDAQ:CNST) is the most popular stock in this table. On the other hand The Greenbrier Companies Inc (NYSE:GBX) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks BioXcel Therapeutics, Inc. (NASDAQ:BTAI) is even less popular than GBX. Our overall hedge fund sentiment score for BTAI is 28.4. 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. Hedge funds dodged a bullet by taking a bearish stance towards BTAI. Our calculations showed that the top 20 most popular hedge fund stocks 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 but managed to beat the market again by 16.2 percentage points. Unfortunately BTAI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BTAI investors were disappointed as the stock returned 6.2% since the end of the third quarter (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 so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.