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Were Hedge Funds Right About Selling Blueprint Medicines Corporation (BPMC)?

Is Blueprint Medicines Corporation (NASDAQ:BPMC) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Blueprint Medicines Corporation (NASDAQ:BPMC) was in 27 hedge funds’ portfolios at the end of the second quarter of 2019. BPMC shareholders have witnessed a decrease in hedge fund sentiment lately. There were 32 hedge funds in our database with BPMC holdings at the end of the previous quarter. Our calculations also showed that BPMC isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jim Tananbaum - Foresite Capital

Unlike former hedge manager, Dr. Steve Sjuggerud, 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 take a glance at the new hedge fund action encompassing Blueprint Medicines Corporation (NASDAQ:BPMC).

Hedge fund activity in Blueprint Medicines Corporation (NASDAQ:BPMC)

At Q2’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BPMC over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BPMC_oct2019

The largest stake in Blueprint Medicines Corporation (NASDAQ:BPMC) was held by Perceptive Advisors, which reported holding $114.4 million worth of stock at the end of March. It was followed by Casdin Capital with a $88.7 million position. Other investors bullish on the company included Viking Global, Cadian Capital, and Foresite Capital.

Judging by the fact that Blueprint Medicines Corporation (NASDAQ:BPMC) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of money managers who sold off their positions entirely by the end of the second quarter. Interestingly, Christopher James’s Partner Fund Management dropped the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $77.2 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dropped about $21 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Blueprint Medicines Corporation (NASDAQ:BPMC). These stocks are Banco Macro SA (NYSE:BMA), Avnet, Inc. (NYSE:AVT), New York Community Bancorp, Inc. (NYSE:NYCB), and Churchill Downs Incorporated (NASDAQ:CHDN). This group of stocks’ market values are closest to BPMC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BMA 10 256737 -6
AVT 27 609308 10
NYCB 19 194360 7
CHDN 25 681457 -4
Average 20.25 435466 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $435 million. That figure was $663 million in BPMC’s case. Avnet, Inc. (NYSE:AVT) is the most popular stock in this table. On the other hand Banco Macro SA (NYSE:BMA) is the least popular one with only 10 bullish hedge fund positions. Blueprint Medicines Corporation (NASDAQ:BPMC) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BPMC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BPMC were disappointed as the stock returned -22.1% 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 this year.

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

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