We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Boston Scientific Corporation (NYSE:BSX) and determine whether hedge funds skillfully traded this stock.
Boston Scientific Corporation (NYSE:BSX) was in 66 hedge funds’ portfolios at the end of June. The all time high for this statistics is 59. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BSX shareholders have witnessed an increase in support from the world’s most elite money managers lately. There were 59 hedge funds in our database with BSX holdings at the end of March. Our calculations also showed that BSX 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
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 peek at the key hedge fund action regarding Boston Scientific Corporation (NYSE:BSX).
What does smart money think about Boston Scientific Corporation (NYSE:BSX)?
At the end of June, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BSX over the last 20 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Boston Scientific Corporation (NYSE:BSX) was held by Viking Global, which reported holding $648 million worth of stock at the end of September. It was followed by Steadfast Capital Management with a $325.1 million position. Other investors bullish on the company included OrbiMed Advisors, Marshall Wace LLP, and D E Shaw. In terms of the portfolio weights assigned to each position Parsifal Capital Management allocated the biggest weight to Boston Scientific Corporation (NYSE:BSX), around 6.56% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, earmarking 6.07 percent of its 13F equity portfolio to BSX.
As industrywide interest jumped, some big names were breaking ground themselves. Bloom Tree Partners, managed by Alok Agrawal, established the most valuable position in Boston Scientific Corporation (NYSE:BSX). Bloom Tree Partners had $41.6 million invested in the company at the end of the quarter. Stephen J. Errico’s Locust Wood Capital Advisers also made a $37.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeremy Green’s Redmile Group, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Daniel S. Och’s OZ Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Boston Scientific Corporation (NYSE:BSX) but similarly valued. We will take a look at Intercontinental Exchange Inc (NYSE:ICE), The Bank of Nova Scotia (NYSE:BNS), Newmont Corporation (NYSE:NEM), Deere & Company (NYSE:DE), Mercadolibre Inc (NASDAQ:MELI), Kimberly Clark Corporation (NYSE:KMB), and ABB Ltd (NYSE:ABB). This group of stocks’ market valuations are similar to BSX’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1745 million. That figure was $2313 million in BSX’s case. Intercontinental Exchange Inc (NYSE:ICE) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Boston Scientific Corporation (NYSE:BSX) is more popular among hedge funds. Our overall hedge fund sentiment score for BSX is 90. 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 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 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. Unfortunately BSX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BSX were disappointed as the stock returned 10.9% since the end of the second quarter 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.