Were Hedge Funds Right About Becton, Dickinson and Company (BDX)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Becton, Dickinson and Company (NYSE:BDX)? The smart money sentiment can provide an answer to this question.

Hedge fund interest in Becton, Dickinson and Company (NYSE:BDX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BDX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare BDX to other stocks including Illinois Tool Works Inc. (NYSE:ITW), Norfolk Southern Corp. (NYSE:NSC), and KE Holdings Inc (NYSE:BEKE) to get a better sense of its popularity.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a peek at the latest hedge fund action regarding Becton, Dickinson and Company (NYSE:BDX).

Do Hedge Funds Think BDX Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 65 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BDX over the last 23 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fundsmith LLP, managed by Terry Smith, holds the number one position in Becton, Dickinson and Company (NYSE:BDX). Fundsmith LLP has a $1.054 billion position in the stock, comprising 3.4% of its 13F portfolio. Coming in second is Generation Investment Management, managed by David Blood and Al Gore, which holds a $932.6 million position; 3.9% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism encompass William von Mueffling’s Cantillon Capital Management, Renaissance Technologies and Ian Simm’s Impax Asset Management. In terms of the portfolio weights assigned to each position Columbus Point allocated the biggest weight to Becton, Dickinson and Company (NYSE:BDX), around 7.67% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, designating 3.91 percent of its 13F equity portfolio to BDX.

Judging by the fact that Becton, Dickinson and Company (NYSE:BDX) has faced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers who were dropping their entire stakes by the end of the first quarter. It’s worth mentioning that Andreas Halvorsen’s Viking Global said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, worth about $128 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dumped its stock, about $40.5 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to Becton, Dickinson and Company (NYSE:BDX). We will take a look at Illinois Tool Works Inc. (NYSE:ITW), Norfolk Southern Corp. (NYSE:NSC), KE Holdings Inc (NYSE:BEKE), Dell Technologies Inc. (NYSE:DELL), Brookfield Asset Management Inc. (NYSE:BAM), Westpac Banking Corporation (NYSE:WBK), and Colgate-Palmolive Company (NYSE:CL). This group of stocks’ market valuations are closest to BDX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $1740 million. That figure was $3733 million in BDX’s case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Becton, Dickinson and Company (NYSE:BDX) is more popular among hedge funds. Our overall hedge fund sentiment score for BDX is 85. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Unfortunately BDX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BDX were disappointed as the stock returned -0.5% since the end of the first quarter (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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