It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% in 2019. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Boston Properties, Inc. (NYSE:BXP).
Is Boston Properties, Inc. (NYSE:BXP) worth your attention right now? Money managers are taking a bullish view. The number of long hedge fund bets moved up by 1 lately. Our calculations also showed that BXP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). BXP was in 24 hedge funds’ portfolios at the end of the third quarter of 2019. There were 23 hedge funds in our database with BXP positions at the end of the previous quarter.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind we’re going to take a gander at the recent hedge fund action surrounding Boston Properties, Inc. (NYSE:BXP).
How are hedge funds trading Boston Properties, Inc. (NYSE:BXP)?
Heading into the fourth quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BXP over the last 17 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Boston Properties, Inc. (NYSE:BXP), worth close to $140.4 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by David E. Shaw of D E Shaw, with a $83.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish encompass Israel Englander’s Millennium Management, Renaissance Technologies and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Welch Capital Partners allocated the biggest weight to Boston Properties, Inc. (NYSE:BXP), around 2.19% of its 13F portfolio. Stevens Capital Management is also relatively very bullish on the stock, earmarking 0.53 percent of its 13F equity portfolio to BXP.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Bridgewater Associates, managed by Ray Dalio, initiated the largest position in Boston Properties, Inc. (NYSE:BXP). Bridgewater Associates had $8.8 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $3.9 million position during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Perella Weinberg Partners, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
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 Vulcan Materials Company (NYSE:VMC), Hewlett Packard Enterprise Company (NYSE:HPE), Imperial Oil Limited (NYSE:IMO), and Palo Alto Networks Inc (NYSE:PANW). This group of stocks’ market valuations are closest to BXP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VMC | 53 | 1965254 | 1 |
| HPE | 27 | 822361 | -1 |
| IMO | 11 | 42957 | -1 |
| PANW | 47 | 2862155 | 2 |
| Average | 34.5 | 1423182 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1423 million. That figure was $448 million in BXP’s case. Vulcan Materials Company (NYSE:VMC) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 11 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 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 26.1% in 2019 and trailed 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 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
