Brooks Automation Inc. [NASDAQ: BRKS]: In Q1 of 2019, the number of hedge funds holding Brooks Automation fell by 25%. However, several top tier hedge funds are still bullish on this stock, and they have been right about it. Up to this point in Q2, BRKS has returned 21.2% outperforming the S&P 500. While the top picks by hedge funds have returned 24.2%, BRKS has made a strong showing, for a stock that hedge funds expected to underperform.
The company’s strong performance is driven largely by its results in Q1 of 2019. The results for Q1 show that its revenues grew by 26% year-over-year. The key growth area for the company has been in the life sciences, which grew by 76%. It’s a clear indicator that the acquisition of life sciences company GENEWIZ was a strategic one.
GENEWIZ is a major provider of gene sequencing and synthesis services. It has more than 4000 institutional clients from all over the globe. Going by BRKS Q1 results, GENEWIZ gained 170 more clients in Q1 and continues to show a strong growth in revenues. In fact of the $198 million in revenues generated in this quarter, $33 million is directly attributable to GENEWIZ. If GENEWIZ continues its current growth in customer numbers and revenues, it is likely to continue pushing up this company’s revenues in coming quarters.
The company also recorded a healthy growth of 4% in the semiconductors market, even as the semiconductor capital equipment market remained slow overall. According to the company CEO Steve Schwartz, the continued growth in semiconductor revenues is a testament of the company’s broad customer base, and its ability to offer a wide range of chip technologies.
Looking at BRKS’s financial statistics, there is good reason to believe that it is a strong stock. One of the factors that could play a huge role in propelling it higher is its beta. The company has a beta of 2.15, which means that in a bullish market, it can easily gain at a much higher rate than the overall market. One key factor that could push up the entire market is a cutback in rates, or a decision by the Fed to hold them where they are at this point. President Trump has been quite vocal against a possible increase in rates. In the event that the Fed heeds his call and doesn’t raise interest rates, it could have a huge impact on the market, by propelling it upwards. This could see high beta stocks like BRKS make significant gains all through the year.
Therefore, it is not surprising that the majority of analysts believe this stock is a strong buy, with several upgrades on its outlook. They reflects its growing strength and its high probability of outperforming the market. In essence, some hedge funds may have cut back on BRKS, but the stock’s overall outlook remains good, as shown by its performance in Q1 of 2019.