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Hedge Funds Still Dumping The Boeing Company (BA)?

The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought The Boeing Company (NYSE:BA) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

The Boeing Company (NYSE:BA) investors should be aware of a decrease in activity from the world’s largest hedge funds in recent months. The Boeing Company (NYSE:BA) was in 39 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 83. Our calculations also showed that BA 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 56 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to analyze the latest hedge fund action encompassing The Boeing Company (NYSE:BA).

How are hedge funds trading The Boeing Company (NYSE:BA)?

At Q2’s end, a total of 39 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BA over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is BA A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of The Boeing Company (NYSE:BA), with a stake worth $1011.8 million reported as of the end of September. Trailing Citadel Investment Group was Coatue Management, which amassed a stake valued at $504.1 million. Citadel Investment Group, Adage Capital Management, and Alkeon Capital 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 Heard Capital allocated the biggest weight to The Boeing Company (NYSE:BA), around 4.57% of its 13F portfolio. Coatue Management is also relatively very bullish on the stock, setting aside 4.44 percent of its 13F equity portfolio to BA.

Since The Boeing Company (NYSE:BA) has faced falling interest from the smart money, logic holds that there was a specific group of hedge funds that elected to cut their entire stakes in the second quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, worth close to $26.1 million in stock, and Kenneth Mario Garschina’s Mason Capital Management was right behind this move, as the fund sold off about $23.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 15 funds in the second quarter.

Let’s go over hedge fund activity in other stocks similar to The Boeing Company (NYSE:BA). These stocks are PetroChina Company Limited (NYSE:PTR), Pinduoduo Inc. (NASDAQ:PDD), QUALCOMM, Incorporated (NASDAQ:QCOM), Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), Lowe’s Companies, Inc. (NYSE:LOW), and Honeywell International Inc. (NYSE:HON). This group of stocks’ market valuations match BA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTR 6 63660 -1
PDD 30 4149572 2
QCOM 74 2202796 14
LMT 53 1553657 -2
GSK 28 2068711 1
LOW 89 6589304 18
HON 50 1447569 6
Average 47.1 2582181 5.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 47.1 hedge funds with bullish positions and the average amount invested in these stocks was $2582 million. That figure was $1280 million in BA’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 6 bullish hedge fund positions. The Boeing Company (NYSE:BA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BA is 24. 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 negative signal and 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 surpassed the market by 23.2 percentage points. Unfortunately BA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BA investors were disappointed as the stock returned -6.3% since Q2 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.