Most investors tend to think that hedge funds and other asset managers are worthless because they can’t beat even simple index fund portfolios. In fact, most people expect hedge funds to compete and outperform the bull market we have seen in recent years. However, hedge funds are usually partially hedged and aim to generate attractive risk-adjusted returns rather than following the ups and downs of stock markets hoping they will outperform the market as a whole. Our research shows that some hedge funds have great stock-picking skills (and we can identify these hedge funds in advance quite accurately), so let’s take a look at the smart money sentiment towards Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN).
East Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) an attractive investment now? Smart money took an optimistic view. The number of bullish bets on hedge funds has increased by 6 in recent months. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) was in 33 hedge fund portfolios at the end of September. The all-time high for this stat is 42. Our calculations also showed that BHVN is not among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 27 hedge funds in our database with BHVN positions at the end of the second quarter.
Robert Atchinson of Adage Capital Management
At Insider Monkey, we scour multiple sources to discover the next big investment idea. For example, lithium prices have more than doubled over the past year, so we’re going through lists like the 10 best electric vehicle stocks to choose the next Tesla that will deliver 10x performance. Although we recommend positions in only a tiny fraction of the companies we review, we check as many stocks as possible. With all that in mind, let’s take a look at the new hedge fund action regarding Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN).
Do hedge funds think BHVN is a good stock to buy now?
At the end of September, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position on BHVN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Marshall Wace LLP held the most valuable stake in Biohaven Pharmaceutical Holding Company Ltd. (NYSE: BHVN), which was worth $377.6 million at the end of the third quarter. In second place was Polar Capital, which raised $174.5 million worth of stock. Knoll Capital Management, Armistice Capital and Kingdon Capital were also big on the stock, becoming one of the company’s biggest hedge fund holders. In terms of portfolio weights assigned to each position Knoll Capital Management assigned the largest weighting to Biohaven Pharmaceutical Holding Company Ltd. (NYSE: BHVN), approximately 59.36% of its 13F portfolio. Kingdon Capital is also relatively bullish on the stock, designating 6.17% of its 13F stock portfolio to BHVN.
As might reasonably be expected, some fund managers jumped headfirst into Biohaven Pharmaceutical Holding Company Ltd. (NYSE: BHVN). Fisher Asset Management, managed by Ken Fisher, established the largest position in Biohaven Pharmaceutical Holding Company Ltd. (NYSE: BHVN). Fisher Asset Management had $37.2 million invested in the company at the end of the quarter. by Richard Driehaus Driehaus Capital also initiated a $17.9 million position during the quarter. The following funds were also among the new BHVN investors: Alyeska Investment Group by Anand Parekh, Adage Capital Management by Phill Gross and Robert Atchinson, and Two Sigma Advisors by John Overdeck and David Siegel.
Let’s look at hedge fund activity in other stocks – not necessarily in the same industry as Biohaven Pharmaceutical Holding Company Ltd. (NYSE: BHVN) but of similar value. We will be looking at Algonquin Power & Utilities Corp. (NYSE:AQN), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Sunrun Inc. (NASDAQ:CLASSES), Ascendis Pharma A/S (NASDAQ:ASND), Globe Life Inc. (NYSE:GL), Syneos Health, Inc. (NASDAQ:SYNC), and Reliance Steel & Aluminum Co. (NYSE:RS). The market valuations of this group of stocks resemble the market valuation of BHVN.
[table] Ticker, Number of HF with positions, Total value of HF positions (x1000), HF position change AQN,15,152646,-9 NBIX,31,980578,-1 RUN,37,1677910,-8 ASND,23,2827508 ,-6 GL,27.775771,-1 SYNH,33.474708.0 RS,24.346919,-3 Mean,27.1,1033720,-4 [/table]
See the table here if you are having formatting issues.
As you can see, these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $1,034 million. This figure was $1064 million in the case of BHVN. Sunrun Inc. (NASDAQ:CLASSES) is the most popular action in this table. On the other hand, Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular with only 15 bullish hedge fund positions. Biohaven Pharmaceutical Holding Company Ltd. (NYSE: BHVN) is not the most popular stock in this group, but interest from hedge funds is still above average. Our overall hedge fund sentiment rating for BHVN is 74.5. Stocks with a 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 prefer to spend our time looking for stocks on which hedge funds are piling up. Our calculations showed that Top 5 Most Popular Stocks among hedge funds returned 95.8% in 2019 and 2020 and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30 and again beat the market by 5.6 percentage points. Unfortunately, BHVN was not as popular as these 5 stocks and hedge funds betting on BHVN were disappointed as the stock was down -19.2% since late September (to 11/30) and under -performed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the Top 5 Most Popular Stocks among hedge funds, as many of these stocks have already outperformed the market since 2019.
Receive real-time email alerts: Follow Biohaven Pharmaceutical Holding Co Ltd. (NYSE: BHVN)
Disclosure: none. This article was originally published on Insider Monkey.