Was The Smart Money Right About Boston Properties, Inc. (BXP)?

How do you pick the next stock to invest in? One way would be to spend days 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).

Boston Properties, Inc. (NYSE:BXP) investors should pay attention to a decrease in hedge fund sentiment lately. Boston Properties, Inc. (NYSE:BXP) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 36. There were 27 hedge funds in our database with BXP holdings at the end of March. Our calculations also showed that BXP isn’t among the 30 most popular stocks among hedge funds (click for Q2 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. 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 79 percentage points since March 2017 (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.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Now we’re going to view the new hedge fund action encompassing Boston Properties, Inc. (NYSE:BXP).

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

At the end of June, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -30% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BXP over the last 24 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, TCI Fund Management held the most valuable stake in Boston Properties, Inc. (NYSE:BXP), which was worth $1310 million at the end of the second quarter. On the second spot was Adage Capital Management which amassed $30.6 million worth of shares. Citadel Investment Group, Waterfront Capital Partners, and Hill Winds Capital 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 Hill Winds Capital allocated the biggest weight to Boston Properties, Inc. (NYSE:BXP), around 4.28% of its 13F portfolio. TCI Fund Management is also relatively very bullish on the stock, dishing out 3.27 percent of its 13F equity portfolio to BXP.

Because Boston Properties, Inc. (NYSE:BXP) has experienced falling interest from the smart money, logic holds that there were a few funds that slashed their entire stakes by the end of the second quarter. Intriguingly, Renaissance Technologies dropped the largest stake of all the hedgies watched by Insider Monkey, comprising an estimated $47.3 million in stock. Daniel Johnson’s fund, Gillson Capital, also said goodbye to its stock, about $14 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 8 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Boston Properties, Inc. (NYSE:BXP) but similarly valued. These stocks are Farfetch Limited (NYSE:FTCH), Affirm Holdings, Inc. (NASDAQ:AFRM), Raymond James Financial, Inc. (NYSE:RJF), Duke Realty Corporation (NYSE:DRE), Brookfield Property Partners LP (NYSE:BPY), Amcor plc (NYSE:AMCR), and Clarivate Plc (NYSE:CLVT). All of these stocks’ market caps are closest to BXP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $1704 million. That figure was $1398 million in BXP’s case. Farfetch Limited (NYSE:FTCH) is the most popular stock in this table. On the other hand Duke Realty Corporation (NYSE:DRE) is the least popular one with only 15 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. Our overall hedge fund sentiment score for BXP is 17. 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 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately BXP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BXP investors were disappointed as the stock returned 2.9% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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