Were Hedge Funds Right About Baxter International Inc. (BAX)?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Baxter International Inc. (NYSE:BAX).

Baxter International Inc. (NYSE:BAX) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. Baxter International Inc. (NYSE:BAX) was in 46 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 59. There were 40 hedge funds in our database with BAX positions at the end of the first quarter. Our calculations also showed that BAX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To the average investor there are numerous tools market participants use to assess publicly traded companies. A pair of the most underrated tools are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can beat their index-focused peers by a healthy margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

David Blood of Generation Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining 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. Keeping this in mind we’re going to take a peek at the recent hedge fund action regarding Baxter International Inc. (NYSE:BAX).

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

Heading into the third quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BAX over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the biggest position in Baxter International Inc. (NYSE:BAX), worth close to $1.691 billion, amounting to 7% of its total 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $203.8 million position; 0.5% of its 13F portfolio is allocated to the company. Some other peers that are bullish encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and Larry Robbins’s Glenview Capital. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to Baxter International Inc. (NYSE:BAX), around 7.01% of its 13F portfolio. Running Oak Capital is also relatively very bullish on the stock, dishing out 2.85 percent of its 13F equity portfolio to BAX.

With a general bullishness amongst the heavyweights, key money managers have jumped into Baxter International Inc. (NYSE:BAX) headfirst. Citadel Investment Group, managed by Ken Griffin, assembled the most valuable position in Baxter International Inc. (NYSE:BAX). Citadel Investment Group had $30.4 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $5.2 million position during the quarter. The following funds were also among the new BAX investors: Paul Tudor Jones’s Tudor Investment Corp, Qing Li’s Sciencast Management, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks similar to Baxter International Inc. (NYSE:BAX). These stocks are Prudential Financial Inc (NYSE:PRU), Las Vegas Sands Corp. (NYSE:LVS), PPG Industries, Inc. (NYSE:PPG), Cintas Corporation (NASDAQ:CTAS), Sempra (NYSE:SRE), CRH PLC (NYSE:CRH), and SYSCO Corporation (NYSE:SYY). This group of stocks’ market values are similar to BAX’s market value.

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As you can see these stocks had an average of 28.6 hedge funds with bullish positions and the average amount invested in these stocks was $866 million. That figure was $2911 million in BAX’s case. Las Vegas Sands Corp. (NYSE:LVS) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 9 bullish hedge fund positions. Baxter International Inc. (NYSE:BAX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BAX is 80.8. 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 positive signal but 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 beat the market again by 3.1 percentage points. Unfortunately BAX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BAX were disappointed as the stock returned -2.7% 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 many of these stocks already outperformed the market since 2019.

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