Were Hedge Funds Right Dumping Boston Properties, Inc. (BXP)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 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 December 31st. In this article we look at what those investors think of Boston Properties, Inc. (NYSE:BXP).

Boston Properties, Inc. (NYSE:BXP) shareholders have witnessed a decrease in hedge fund interest in recent months. Our calculations also showed that BXP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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. 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 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Israel Englander of Millennium Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the key hedge fund action surrounding Boston Properties, Inc. (NYSE:BXP).

What does smart money think about Boston Properties, Inc. (NYSE:BXP)?

At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BXP over the last 18 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in Boston Properties, Inc. (NYSE:BXP) was held by Citadel Investment Group, which reported holding $154.4 million worth of stock at the end of September. It was followed by D E Shaw with a $79.3 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Welch Capital Partners allocated the biggest weight to Boston Properties, Inc. (NYSE:BXP), around 2.54% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to BXP.

Judging by the fact that Boston Properties, Inc. (NYSE:BXP) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers who were dropping their positions entirely heading into Q4. Intriguingly, Ray Dalio’s Bridgewater Associates said goodbye to the largest position of all the hedgies monitored by Insider Monkey, worth an estimated $8.8 million in stock. Ken Heebner’s fund, Capital Growth Management, also said goodbye to its stock, about $3.9 million worth. These transactions are interesting, as total hedge fund interest fell by 7 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Boston Properties, Inc. (NYSE:BXP). These stocks are XP Inc. (NASDAQ:XP), Fastenal Company (NASDAQ:FAST), Ball Corporation (NYSE:BLL), and Copart, Inc. (NASDAQ:CPRT). This group of stocks’ market values are similar to BXP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XP 28 398066 28
FAST 33 834608 3
BLL 44 679601 10
CPRT 46 984642 3
Average 37.75 724229 11

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $724 million. That figure was $450 million in BXP’s case. Copart, Inc. (NASDAQ:CPRT) is the most popular stock in this table. On the other hand XP Inc. (NASDAQ:XP) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Boston Properties, Inc. (NYSE:BXP) is even less popular than XP. Hedge funds dodged a bullet by taking a bearish stance towards BXP. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately BXP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BXP investors were disappointed as the stock returned -29.7% during the same time period 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 so far in Q1.

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