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Should I Avoid BioMarin Pharmaceutical Inc. (BMRN)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) based on that data and determine whether they were really smart about the stock.

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) has experienced a decrease in support from the world’s most elite money managers lately. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) was in 45 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 54. There were 54 hedge funds in our database with BMRN positions at the end of the first quarter. Our calculations also showed that BMRN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 shareholders, hedge funds are assumed to be slow, old financial tools of years past. While there are more than 8000 funds trading today, Our researchers look at the moguls of this club, around 850 funds. These investment experts shepherd bulk of the hedge fund industry’s total asset base, and by tracking their finest investments, Insider Monkey has deciphered a number of investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Felix Baker - Baker Bros.

Felix Baker of Baker Bros.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing BioMarin Pharmaceutical Inc. (NASDAQ:BMRN).

How have hedgies been trading BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)?

Heading into the third quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. By comparison, 45 hedge funds held shares or bullish call options in BMRN a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Baker Bros. Advisors, managed by Julian Baker and Felix Baker, holds the biggest position in BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). Baker Bros. Advisors has a $936.1 million position in the stock, comprising 4.1% of its 13F portfolio. On Baker Bros. Advisors’s heels is Behzad Aghazadeh of Avoro Capital Advisors (venBio Select Advisor), with a $228.2 million position; 4.5% of its 13F portfolio is allocated to the stock. Other peers that are bullish include William Leland Edwards’s Palo Alto Investors, Phill Gross and Robert Atchinson’s Adage Capital Management and Nancy Zevenbergen’s Zevenbergen Capital Investments. In terms of the portfolio weights assigned to each position Palo Alto Investors allocated the biggest weight to BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), around 10.41% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 6.74 percent of its 13F equity portfolio to BMRN.

Judging by the fact that BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few money managers who sold off their full holdings heading into Q3. Intriguingly, Andreas Halvorsen’s Viking Global cut the largest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $122.8 million in stock, and Samuel Isaly’s OrbiMed Advisors was right behind this move, as the fund said goodbye to about $45.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 9 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) but similarly valued. These stocks are Fortinet Inc (NASDAQ:FTNT), Archer Daniels Midland Company (NYSE:ADM), Palo Alto Networks Inc (NYSE:PANW), Genmab A/S (NASDAQ:GMAB), Dollar Tree, Inc. (NASDAQ:DLTR), LyondellBasell Industries NV (NYSE:LYB), and Equity Residential (NYSE:EQR). This group of stocks’ market caps resemble BMRN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FTNT 44 1815016 15
ADM 28 606680 -4
PANW 51 3587653 4
GMAB 15 243405 1
DLTR 60 2268495 18
LYB 32 509614 -3
EQR 33 555124 9
Average 37.6 1369427 5.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $1369 million. That figure was $2006 million in BMRN’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 15 bullish hedge fund positions. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BMRN is 54.3. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately BMRN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BMRN were disappointed as the stock returned -36.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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