How do you pick the next stock to invest in? One way would be to spend hours 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 Boston Properties, Inc. (NYSE:BXP).
Is Boston Properties, Inc. (NYSE:BXP) the right pick for your portfolio? Prominent investors are betting on the stock. The number of bullish hedge fund bets increased by 10 in recent months. Our calculations also showed that BXP isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a look at the key hedge fund action surrounding Boston Properties, Inc. (NYSE:BXP).
How have hedgies been trading Boston Properties, Inc. (NYSE:BXP)?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 59% from the fourth quarter of 2018. On the other hand, there were a total of 11 hedge funds with a bullish position in BXP a year ago. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Boston Properties, Inc. (NYSE:BXP) was held by AEW Capital Management, which reported holding $191.8 million worth of stock at the end of March. It was followed by Millennium Management with a $86.1 million position. Other investors bullish on the company included Citadel Investment Group, Balyasny Asset Management, and Renaissance Technologies.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the largest position in Boston Properties, Inc. (NYSE:BXP). Balyasny Asset Management had $48.5 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $7 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Minhua Zhang’s Weld Capital Management, and Benjamin A. Smith’s Laurion Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Boston Properties, Inc. (NYSE:BXP) but similarly valued. These stocks are Ulta Beauty, Inc. (NASDAQ:ULTA), Stanley Black & Decker, Inc. (NYSE:SWK), ArcelorMittal (NYSE:MT), and The Clorox Company (NYSE:CLX). This group of stocks’ market caps resemble BXP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ULTA | 43 | 994415 | 1 |
| SWK | 31 | 1033655 | -4 |
| MT | 12 | 222442 | -1 |
| CLX | 29 | 1070055 | 1 |
| Average | 28.75 | 830142 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $830 million. That figure was $572 million in BXP’s case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand ArcelorMittal (NYSE:MT) is the least popular one with only 12 bullish hedge fund positions. Boston Properties, Inc. (NYSE:BXP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately BXP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BXP investors were disappointed as the stock returned -2.3% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
