How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Boeing Company (NYSE:BA).
The Boeing Company (NYSE:BA) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 59 hedge funds’ portfolios at the end of the second quarter of 2021. Our calculations also showed that BA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare BA to other stocks including Amgen, Inc. (NASDAQ:AMGN), The Charles Schwab Corporation (NYSE:SCHW), and Lowe’s Companies, Inc. (NYSE:LOW) to get a better sense of its popularity.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Phillip Gross of Adage Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a peek at the key hedge fund action encompassing The Boeing Company (NYSE:BA).
Do Hedge Funds Think BA Is A Good Stock To Buy Now?
At the end of June, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 39 hedge funds held shares or bullish call options in BA a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in The Boeing Company (NYSE:BA), which was worth $1803.9 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $361.2 million worth of shares. D E Shaw, Adage Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Heard Capital allocated the biggest weight to The Boeing Company (NYSE:BA), around 4.92% of its 13F portfolio. Columbus Hill Capital Management is also relatively very bullish on the stock, setting aside 4.45 percent of its 13F equity portfolio to BA.
Judging by the fact that The Boeing Company (NYSE:BA) has faced bearish sentiment from hedge fund managers, we can see that there was a specific group of funds that slashed their entire stakes last quarter. It’s worth mentioning that Benjamin A. Smith’s Laurion Capital Management dropped the largest stake of the 750 funds tracked by Insider Monkey, totaling about $88 million in stock. Steve Cohen’s fund, Point72 Asset Management, also sold off its stock, about $38.6 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to The Boeing Company (NYSE:BA). We will take a look at Amgen, Inc. (NASDAQ:AMGN), The Charles Schwab Corporation (NYSE:SCHW), Lowe’s Companies, Inc. (NYSE:LOW), Rio Tinto Group (NYSE:RIO), HDFC Bank Limited (NYSE:HDB), Intuit Inc. (NASDAQ:INTU), and BlackRock, Inc. (NYSE:BLK). This group of stocks’ market caps match BA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMGN | 53 | 1651799 | 6 |
| SCHW | 72 | 4851670 | -4 |
| LOW | 63 | 4968014 | 2 |
| RIO | 21 | 1420451 | -4 |
| HDB | 39 | 1731917 | 12 |
| INTU | 66 | 5382791 | -2 |
| BLK | 47 | 1282801 | 5 |
| Average | 51.6 | 3041349 | 2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.6 hedge funds with bullish positions and the average amount invested in these stocks was $3041 million. That figure was $1369 million in BA’s case. The Charles Schwab Corporation (NYSE:SCHW) is the most popular stock in this table. On the other hand Rio Tinto Group (NYSE:RIO) is the least popular one with only 21 bullish hedge fund positions. The Boeing Company (NYSE:BA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BA is 63.6. 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 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 25.7% in 2021 through September 27th and beat the market again by 6.2 percentage points. Unfortunately BA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BA were disappointed as the stock returned -6.4% since the end of June (through 9/27) and underperformed the market. If you are interested in investing 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 already outperformed the market since 2019.
Follow Boeing Co (NYSE:BA)
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Disclosure: None. This article was originally published at Insider Monkey.
