Should You Avoid Boston Properties, Inc. (BXP)?

Earlier this year, many hedge funds were holding a larger percentage of their assets in cash than at any other time in recent memory, as fears that the market was due for a correction abounded. This led to many small-cap stocks being hit hard, as hedge funds, which tend to be some of their staunchest backers, liquidated their holdings. Now however, hedge funds appear to be growing more confident and putting their money back into equities, which has led to small-cap stocks taking off, with the Russell 2000 ETF (IWM) having outperformed the S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. In this article, we’ll see how this large shift in hedge fund activity impacted Boston Properties, Inc. (NYSE:BXP).

Boston Properties, Inc. (NYSE:BXP) has experienced only a slight decrease in support from the world’s most successful money managers lately. During the third quarter, the number of funds tracked by Insider Monkey long the stock inched down by one to 18. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Sun Life Financial Inc. (USA) (NYSE:SLF), Marathon Petroleum Corp (NYSE:MPC), and Cerner Corporation (NASDAQ:CERN) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How are hedge funds trading Boston Properties, Inc. (NYSE:BXP)?

At the end of the third quarter, 17 funds tracked by Insider Monkey were long Boston Properties, which represents a fall of 6% from the previous quarter. On the other hand, there were a total of 19 hedge funds with a bullish position in BXP at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, AEW Capital Management, led by Jeffrey Furber, holds the largest position in Boston Properties, Inc. (NYSE:BXP). AEW Capital Management has a $303.9 million position in the stock, comprising 6.3% of its 13F portfolio. The second largest stake is held by Cliff Asness’ AQR Capital Management holding a $33.9 million position. Other professional money managers with similar optimism comprise Phill Gross and Robert Atchinson’s Adage Capital Management, and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Because Boston Properties, Inc. (NYSE:BXP) has encountered declining sentiment from hedge fund managers, it’s safe to say that there were a few funds who were dropping their full holdings by the end of the third quarter. Intriguingly, Michael Swotes’ Castle Ridge Investment Management cut the biggest investment of the 700 funds watched by Insider Monkey, comprising close to $4.6 million in stock. J. Alan Reid, Jr.’s fund, Forward Management, also dumped its stock, worth about $3.7 million.

Let’s go over hedge fund activity in other stocks similar to Boston Properties, Inc. (NYSE:BXP). These stocks are Sun Life Financial Inc. (USA) (NYSE:SLF), Marathon Petroleum Corp (NYSE:MPC), Cerner Corporation (NASDAQ:CERN), and Baker Hughes Incorporated (NYSE:BHI). This group of stocks’ market valuations are similar to BXP’s market valuation.

As you can see these stocks had an average of 33 funds with bullish positions and the average amount invested in these stocks was $1.6 billion, which is higher than the $404 million figure in BXP’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table, while Sun Life Financial Inc. (USA) (NYSE:SLF) is the least popular one with only 13 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. In this regard Marathon Petroleum Corp (NYSE:MPC) might be a better candidate to consider taking a long position in.

Disclosure: None