Is Baxter International Inc. (BAX) A Good Stock To Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Baxter International Inc. (NYSE:BAX) a good investment right now? The smart money seems to be getting less optimistic, as the number of long hedge fund bets dropped by four in recent months. At the end of this article we will also compare BAX to other stocks including China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU), CSX Corporation (NYSE:CSX), and Barrick Gold Corporation (USA) (NYSE:ABX) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Keeping this in mind, we’re going to view the latest action encompassing Baxter International Inc. (NYSE:BAX).

How are hedge funds trading Baxter International Inc. (NYSE:BAX)?

A total of 50 funds tracked by Insider Monkey were bullish on Baxter International, down by 7% compared to the end of June. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Third Point, managed by Dan Loeb, holds the most valuable position in Baxter International Inc. (NYSE:BAX). Third Point has a $2.4705 billion position in the stock, comprising 21.5% of its 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $297.6 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish comprise Cliff Asness’ AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.

Since Baxter International Inc. (NYSE:BAX) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of funds that decided to sell off their entire stakes last quarter. It’s worth mentioning that First Eagle Investment Management said goodbye to the largest investment of the 700 funds monitored by Insider Monkey, valued at close to $96.3 million in stock, and Ian Cumming and Joseph Steinberg’s Leucadia National was right behind this move, as the fund sold off about $31.7 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Baxter International Inc. (NYSE:BAX) but similarly valued. These stocks are China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU), CSX Corporation (NYSE:CSX), Barrick Gold Corporation (USA) (NYSE:ABX), and Tyson Foods, Inc. (NYSE:TSN). This group of stocks’ market values are similar to BAX’s market value.

As you can see these stocks had an average of 34 funds long the stock at the end of September and the average amount invested in these stocks was $1.03 billion. That figure was $4.35 billion in Baxter’s case. Barrick Gold Corporation (USA) (NYSE:ABX) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Baxter International Inc. (NYSE:BAX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.