How Did The Boeing Company (BA) Compare Against Top Hedge Fund Stocks in 2019?

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 approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% 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 The Boeing Company (NYSE:BA).

Is The Boeing Company (NYSE:BA) going to take off soon? The smart money is becoming hopeful. The number of long hedge fund positions went up by 4 in recent months. Our calculations also showed that BA currently ranks 25th 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).

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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Andreas Halvorsen of Viking Global

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. 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 already gained 20 percent. Keeping this in mind we’re going to go over the recent hedge fund action encompassing The Boeing Company (NYSE:BA).

What have hedge funds been doing with The Boeing Company (NYSE:BA)?

Heading into the fourth quarter of 2019, a total of 78 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BA over the last 17 quarters. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Viking Global held the most valuable stake in The Boeing Company (NYSE:BA), which was worth $854.8 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $262.8 million worth of shares. Steadfast Capital Management, Alkeon 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 Theleme Partners allocated the biggest weight to The Boeing Company (NYSE:BA), around 6.28% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, designating 5.84 percent of its 13F equity portfolio to BA.

Now, key money managers were breaking ground themselves. Palestra Capital Management, managed by Andrew Immerman and Jeremy Schiffman, assembled the largest call position in The Boeing Company (NYSE:BA). Palestra Capital Management had $140.8 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also initiated a $42 million position during the quarter. The following funds were also among the new BA investors: Richard Gerson and Navroz D. Udwadia’s Falcon Edge Capital, Israel Englander’s Millennium Management, and Jeff Lignelli’s Incline Global Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Boeing Company (NYSE:BA) but similarly valued. These stocks are Cisco Systems, Inc. (NASDAQ:CSCO), UnitedHealth Group Inc. (NYSE:UNH), Comcast Corporation (NASDAQ:CMCSA), and Novartis AG (NYSE:NVS). This group of stocks’ market values match BA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 61.25 hedge funds with bullish positions and the average amount invested in these stocks was $4464 million. That figure was $3965 million in BA’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 28 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. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately BA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BA were disappointed as the stock returned 7.1% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year.

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.