In this article we will analyze whether Boston Scientific Corporation (NYSE:BSX) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is BSX a good stock to buy now? Boston Scientific Corporation (NYSE:BSX) investors should be aware of a decrease in support from the world’s most elite money managers lately. Boston Scientific Corporation (NYSE:BSX) was in 61 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 66. Our calculations also showed that BSX isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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.
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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the key hedge fund action regarding Boston Scientific Corporation (NYSE:BSX).
Hedge fund activity in Boston Scientific Corporation (NYSE:BSX)
At the end of September, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BSX over the last 21 quarters. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Viking Global was the largest shareholder of Boston Scientific Corporation (NYSE:BSX), with a stake worth $719.5 million reported as of the end of September. Trailing Viking Global was Steadfast Capital Management, which amassed a stake valued at $362.1 million. Farallon Capital, OrbiMed Advisors, and Fisher Asset 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 Blue Whale Capital allocated the biggest weight to Boston Scientific Corporation (NYSE:BSX), around 6.43% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, dishing out 5.12 percent of its 13F equity portfolio to BSX.
Since Boston Scientific Corporation (NYSE:BSX) has faced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few funds who were dropping their entire stakes heading into Q4. It’s worth mentioning that Doug Silverman and Alexander Klabin’s Senator Investment Group sold off the biggest position of all the hedgies followed by Insider Monkey, valued at close to $61.4 million in stock, and David Zorub’s Parsifal Capital Management was right behind this move, as the fund cut about $22.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Boston Scientific Corporation (NYSE:BSX). We will take a look at Norfolk Southern Corp. (NYSE:NSC), General Electric Company (NYSE:GE), Moody’s Corporation (NYSE:MCO), America Movil SAB de CV (NYSE:AMX), Applied Materials, Inc. (NASDAQ:AMAT), Vale SA (NYSE:VALE), and ABB Ltd (NYSE:ABB). This group of stocks’ market valuations are closest 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 39.1 hedge funds with bullish positions and the average amount invested in these stocks was $2795 million. That figure was $2537 million in BSX’s case. Moody’s Corporation (NYSE:MCO) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 13 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 77.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Unfortunately BSX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BSX were disappointed as the stock returned -10.6% since the end of the third quarter (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.