Were Hedge Funds Right About Dumping BeiGene, Ltd. (BGNE)?

Is BeiGene, Ltd. (NASDAQ:BGNE) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is BeiGene, Ltd. (NASDAQ:BGNE) going to take off soon? Money managers are selling. The number of bullish hedge fund bets were cut by 3 in recent months. Our calculations also showed that BGNE isn’t among the 30 most popular stocks among hedge funds (see the video below). BGNE was in 12 hedge funds’ portfolios at the end of the second quarter of 2019. There were 15 hedge funds in our database with BGNE holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.


Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the fresh hedge fund action surrounding BeiGene, Ltd. (NASDAQ:BGNE).

What have hedge funds been doing with BeiGene, Ltd. (NASDAQ:BGNE)?

At Q2’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BGNE over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Felix Baker - Baker Bros.

The largest stake in BeiGene, Ltd. (NASDAQ:BGNE) was held by Baker Bros. Advisors, which reported holding $1459.8 million worth of stock at the end of March. It was followed by Hillhouse Capital Management with a $128.2 million position. Other investors bullish on the company included Rock Springs Capital Management, Clough Capital Partners, and Citadel Investment Group.

Because BeiGene, Ltd. (NASDAQ:BGNE) has experienced declining sentiment from hedge fund managers, logic holds that there was a specific group of funds that elected to cut their positions entirely in the second quarter. Interestingly, Samuel Isaly’s OrbiMed Advisors dumped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $37.3 million in stock, and Brian Ashford-Russell and Tim Woolley’s Polar Capital was right behind this move, as the fund dumped about $13.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to BeiGene, Ltd. (NASDAQ:BGNE). We will take a look at Pool Corporation (NASDAQ:POOL), Apartment Investment and Management Co. (NYSE:AIV), Liberty Property Trust (NYSE:LPT), and Etsy Inc (NASDAQ:ETSY). All of these stocks’ market caps match BGNE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
POOL 22 342084 6
AIV 24 701466 3
LPT 19 337910 0
ETSY 41 1228455 2
Average 26.5 652479 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $652 million. That figure was $1644 million in BGNE’s case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand Liberty Property Trust (NYSE:LPT) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks BeiGene, Ltd. (NASDAQ:BGNE) is even less popular than LPT. Hedge funds dodged a bullet by taking a bearish stance towards BGNE. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BGNE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BGNE investors were disappointed as the stock returned -1.2% during the third 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 many of these stocks already outperformed the market so far in 2019.

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