Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Boston Scientific Corporation (NYSE:BSX).
Boston Scientific Corporation (NYSE:BSX) was in 44 hedge funds’ portfolios at the end of March. The all time high for this statistic is 66. BSX has seen a decrease in enthusiasm from smart money recently. There were 58 hedge funds in our database with BSX positions at the end of the fourth quarter. Our calculations also showed that BSX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Ole Andreas Halvorsen of Viking Global
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. With all of this in mind let’s go over the recent hedge fund action encompassing Boston Scientific Corporation (NYSE:BSX).
Do Hedge Funds Think BSX Is A Good Stock To Buy Now?
At first quarter’s end, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. By comparison, 59 hedge funds held shares or bullish call options in BSX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Viking Global, managed by Andreas Halvorsen, holds the most valuable position in Boston Scientific Corporation (NYSE:BSX). Viking Global has a $691.7 million position in the stock, comprising 2.1% of its 13F portfolio. Coming in second is Farallon Capital, which holds a $495.6 million position; the fund has 2.7% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise OrbiMed Advisors, Brandon Haley’s Holocene Advisors and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Locust Wood Capital Advisers allocated the biggest weight to Boston Scientific Corporation (NYSE:BSX), around 3.88% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, setting aside 3.17 percent of its 13F equity portfolio to BSX.
Due to the fact that Boston Scientific Corporation (NYSE:BSX) has witnessed a decline in interest from hedge fund managers, we can see that there is a sect of fund managers who were dropping their positions entirely heading into Q2. Intriguingly, Renaissance Technologies dumped the biggest position of the 750 funds watched by Insider Monkey, worth close to $99.6 million in stock. Alok Agrawal’s fund, Bloom Tree Partners, also sold off its stock, about $60.6 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 14 funds heading into Q2.
Let’s now review hedge fund activity in other stocks similar to Boston Scientific Corporation (NYSE:BSX). We will take a look at Waste Management, Inc. (NYSE:WM), Emerson Electric Co. (NYSE:EMR), Humana Inc (NYSE:HUM), Northrop Grumman Corporation (NYSE:NOC), Metlife Inc (NYSE:MET), Atlassian Corporation Plc (NASDAQ:TEAM), and Southern Copper Corporation (NYSE:SCCO). All of these stocks’ market caps resemble BSX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WM | 32 | 3290087 | -5 |
| EMR | 45 | 796035 | -1 |
| HUM | 53 | 2878475 | -6 |
| NOC | 40 | 1510503 | 0 |
| MET | 32 | 1147122 | -5 |
| TEAM | 67 | 3955751 | -2 |
| SCCO | 27 | 589771 | 4 |
| Average | 42.3 | 2023963 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.3 hedge funds with bullish positions and the average amount invested in these stocks was $2024 million. That figure was $2884 million in BSX’s case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 27 bullish hedge fund positions. Boston Scientific Corporation (NYSE:BSX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BSX is 32.3. 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. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on BSX, though not to the same extent, as the stock returned 11.3% since Q1 (through June 18th) and outperformed the market as well.
Follow Boston Scientific Corp (NYSE:BSX)
Follow Boston Scientific Corp (NYSE:BSX)
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Disclosure: None. This article was originally published at Insider Monkey.
