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Becton, Dickinson and Company (BDX) Fell Out Of Favor With Hedge Funds

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. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Becton, Dickinson and Company (NYSE:BDX) and determine whether the smart money was really smart about this stock.

Becton, Dickinson and Company (NYSE:BDX) has experienced a decrease in hedge fund interest in recent months. Becton, Dickinson and Company (NYSE:BDX) was in 53 hedge funds’ portfolios at the end of June. The all time high for this statistics is 56. There were 56 hedge funds in our database with BDX positions at the end of the first quarter. Our calculations also showed that BDX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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.

Arthur B Cohen and Joseph Healey of Healthcor Management LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a glance at the latest hedge fund action encompassing Becton, Dickinson and Company (NYSE:BDX).

What does smart money think about Becton, Dickinson and Company (NYSE:BDX)?

At the end of June, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BDX over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Generation Investment Management held the most valuable stake in Becton, Dickinson and Company (NYSE:BDX), which was worth $617.6 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $290.5 million worth of shares. Citadel Investment Group, Healthcor Management LP, and Intermede Investment 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 Healthcor Management LP allocated the biggest weight to Becton, Dickinson and Company (NYSE:BDX), around 6.08% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, setting aside 4.83 percent of its 13F equity portfolio to BDX.

Because Becton, Dickinson and Company (NYSE:BDX) has faced declining sentiment from the smart money, we can see that there is a sect of funds who were dropping their entire stakes heading into Q3. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest investment of the 750 funds watched by Insider Monkey, comprising about $36.5 million in stock. Christopher James’s fund, Partner Fund Management, also sold off its stock, about $34.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds heading into Q3.

Let’s now review hedge fund activity in other stocks similar to Becton, Dickinson and Company (NYSE:BDX). We will take a look at Rio Tinto Group (NYSE:RIO), Crown Castle International Corp. (REIT) (NYSE:CCI), Cigna Corporation (NYSE:CI), Prologis Inc (NYSE:PLD), Caterpillar Inc. (NYSE:CAT), Dominion Energy Inc. (NYSE:D), and The Goldman Sachs Group, Inc. (NYSE:GS). This group of stocks’ market values are closest to BDX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RIO 20 1324146 0
CCI 43 1988345 3
CI 72 2871074 -2
PLD 35 433481 -5
CAT 39 2667687 5
D 33 366229 -1
GS 69 3543027 -5
Average 44.4 1884856 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.4 hedge funds with bullish positions and the average amount invested in these stocks was $1885 million. That figure was $1971 million in BDX’s case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Rio Tinto Group (NYSE:RIO) is the least popular one with only 20 bullish hedge fund positions. Becton, Dickinson and Company (NYSE:BDX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BDX is 62.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately BDX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BDX were disappointed as the stock returned 1.5% during the same time period 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 many of these stocks already outperformed the market so far this year.

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