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Hedge Funds Are Flocking Into Baxter International Inc. (BAX)

In this article you are going to find out whether hedge funds think Baxter International Inc. (NYSE:BAX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Baxter International Inc. (NYSE:BAX) investors should be aware of an increase in hedge fund sentiment recently. BAX was in 50 hedge funds’ portfolios at the end of the first quarter of 2020. There were 47 hedge funds in our database with BAX positions at the end of the previous quarter. Our calculations also showed that BAX isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

YORK CAPITAL MANAGEMENT

James Dinan of York Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the key hedge fund action surrounding Baxter International Inc. (NYSE:BAX).

Hedge fund activity in Baxter International Inc. (NYSE:BAX)

At the end of the first quarter, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in BAX over the last 18 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.

More specifically, Third Point was the largest shareholder of Baxter International Inc. (NYSE:BAX), with a stake worth $940.2 million reported as of the end of September. Trailing Third Point was Generation Investment Management, which amassed a stake valued at $824.9 million. Citadel Investment Group, AQR Capital Management, and Millennium Management 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 Third Point allocated the biggest weight to Baxter International Inc. (NYSE:BAX), around 15% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, dishing out 5.86 percent of its 13F equity portfolio to BAX.

As one would reasonably expect, key hedge funds have been driving this bullishness. Glenview Capital, managed by Larry Robbins, assembled the biggest position in Baxter International Inc. (NYSE:BAX). Glenview Capital had $39.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $38.7 million position during the quarter. The other funds with new positions in the stock are James Dinan’s York Capital Management, Christopher James’s Partner Fund Management, and Kevin Molloy’s Iron Triangle Partners.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Baxter International Inc. (NYSE:BAX) but similarly valued. These stocks are The PNC Financial Services Group Inc. (NYSE:PNC), NetEase, Inc (NASDAQ:NTES), National Grid plc (NYSE:NGG), and Zoom Video Communications, Inc. (NASDAQ:ZM). This group of stocks’ market valuations are similar to BAX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PNC 40 1263969 -2
NTES 39 3286243 -5
NGG 6 435493 0
ZM 47 2383850 19
Average 33 1842389 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1842 million. That figure was $3209 million in BAX’s case. Zoom Video Communications, Inc. (NASDAQ:ZM) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Baxter International Inc. (NYSE:BAX) is more popular among hedge funds. 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately BAX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BAX were disappointed as the stock returned 7.1% during the second quarter (through May 22nd) 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 most of these stocks already outperformed the market in 2020.

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

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