Was The Smart Money Right About Baxter International Inc. (BAX)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. What do these smart investors think about Baxter International Inc. (NYSE:BAX)?

Baxter International Inc. (NYSE:BAX) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Baxter International Inc. (NYSE:BAX) was in 42 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 59. There were 51 hedge funds in our database with BAX positions at the end of the third quarter. Our calculations also showed that BAX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Daniel Sundheim of D1 Capital Partners

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 glance at the latest hedge fund action regarding Baxter International Inc. (NYSE:BAX).

Do Hedge Funds Think BAX Is A Good Stock To Buy Now?

At Q4’s end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 47 hedge funds with a bullish position in BAX a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Generation Investment Management held the most valuable stake in Baxter International Inc. (NYSE:BAX), which was worth $1398.1 million at the end of the fourth quarter. On the second spot was D E Shaw which amassed $320 million worth of shares. Two Sigma Advisors, Arrowstreet Capital, and D1 Capital Partners 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 Tri Locum Partners allocated the biggest weight to Baxter International Inc. (NYSE:BAX), around 8.7% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, dishing out 6.24 percent of its 13F equity portfolio to BAX.

Due to the fact that Baxter International Inc. (NYSE:BAX) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of hedge funds that slashed their positions entirely in the fourth quarter. Interestingly, Stephen J. Errico’s Locust Wood Capital Advisers sold off the largest position of the 750 funds watched by Insider Monkey, valued at an estimated $38.9 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund said goodbye to about $34.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds in the fourth quarter.

Let’s now review hedge fund activity in other stocks similar to Baxter International Inc. (NYSE:BAX). These stocks are CNOOC Limited (NYSE:CEO), Pinterest, Inc. (NYSE:PINS), Thomson Reuters Corporation (NYSE:TRI), Barrick Gold Corporation (NYSE:GOLD), Public Storage (NYSE:PSA), Match Group, Inc. (NASDAQ:MTCH), and Rocket Companies, Inc. (NYSE:RKT). This group of stocks’ market caps match BAX’s market cap.

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As you can see these stocks had an average of 43.3 hedge funds with bullish positions and the average amount invested in these stocks was $1885 million. That figure was $2802 million in BAX’s case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 13 bullish hedge fund positions. Baxter International Inc. (NYSE:BAX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BAX is 35. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately BAX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BAX investors were disappointed as the stock returned 7.1% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.

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