Did Hedge Funds Catch A Break With 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. We at Insider Monkey have plowed through 867 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 September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Baxter International Inc. (NYSE:BAX) and determine whether the smart money was really smart about this stock.

Is Baxter International Inc. (NYSE:BAX) the right pick for your portfolio? Hedge funds were getting less optimistic. The number of bullish hedge fund bets went down by 4 lately. Baxter International Inc. (NYSE:BAX) was in 42 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 59. Our calculations also showed that BAX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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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 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. Keeping this in mind we’re going to take a look at the latest hedge fund action surrounding Baxter International Inc. (NYSE:BAX).

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

At Q3’s end, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in BAX over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Is BAX A Good Stock To Buy?

Among these funds, Generation Investment Management held the most valuable stake in Baxter International Inc. (NYSE:BAX), which was worth $1667.9 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $307 million worth of shares. Millennium Management, D E Shaw, and Glenview 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 Tri Locum Partners allocated the biggest weight to Baxter International Inc. (NYSE:BAX), around 9.98% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, designating 6.93 percent of its 13F equity portfolio to BAX.

Because Baxter International Inc. (NYSE:BAX) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers who sold off their entire stakes last quarter. It’s worth mentioning that Christopher James’s Partner Fund Management said goodbye to the biggest investment of all the hedgies tracked by Insider Monkey, valued at about $36.9 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $11 million worth. These moves are interesting, as total hedge fund interest dropped by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Baxter International Inc. (NYSE:BAX) but similarly valued. These stocks are SYSCO Corporation (NYSE:SYY), STMicroelectronics N.V. (NYSE:STM), Cintas Corporation (NASDAQ:CTAS), Marathon Petroleum Corp (NYSE:MPC), Alcon Inc. (NYSE:ALC), Motorola Solutions Inc (NYSE:MSI), and Cognizant Technology Solutions Corp (NASDAQ:CTSH). All of these stocks’ market caps match BAX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYY 29 2245599 -11
STM 11 49115 -2
CTAS 36 781970 15
MPC 43 2688865 -5
ALC 20 1263277 -2
MSI 34 1266185 -3
CTSH 29 2336693 -12
Average 28.9 1518815 -2.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $1519 million. That figure was $3486 million in BAX’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 11 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 70.8. 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. 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 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on BAX as the stock returned 6.6% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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