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Is Becton, Dickinson and Company (BDX) Going to Burn These Hedge Funds?

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·6 min read
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  • BDX
  • ^GSPC

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Becton, Dickinson and Company (NYSE:BDX).

Becton, Dickinson and Company (NYSE:BDX) was in 52 hedge funds' portfolios at the end of June. The all time high for this statistic is 65. BDX has experienced a decrease in hedge fund sentiment recently. There were 65 hedge funds in our database with BDX holdings at the end of March. Our calculations also showed that BDX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most market participants, hedge funds are seen as slow, outdated investment tools of years past. While there are over 8000 funds in operation at the moment, Our researchers look at the crème de la crème of this club, about 850 funds. Most estimates calculate that this group of people shepherd bulk of all hedge funds' total asset base, and by watching their top investments, Insider Monkey has unsheathed a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website .

David Blood
David Blood

David Blood of Generation Investment Management

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. Now we're going to check out the latest hedge fund action encompassing Becton, Dickinson and Company (NYSE:BDX).

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

At the end of the second quarter, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 53 hedge funds with a bullish position in BDX a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Becton, Dickinson and Company (NYSE:BDX) was held by Fundsmith LLP, which reported holding $1052.7 million worth of stock at the end of June. It was followed by Generation Investment Management with a $934.9 million position. Other investors bullish on the company included Cantillon Capital Management, Impax Asset Management, and Intermede Investment Partners. In terms of the portfolio weights assigned to each position Columbus Point allocated the biggest weight to Becton, Dickinson and Company (NYSE:BDX), around 6.35% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, setting aside 3.88 percent of its 13F equity portfolio to BDX.

Seeing as Becton, Dickinson and Company (NYSE:BDX) has faced bearish sentiment from the smart money, we can see that there were a few fund managers that elected to cut their positions entirely by the end of the second quarter. Intriguingly, John Overdeck and David Siegel's Two Sigma Advisors cut the biggest position of the "upper crust" of funds monitored by Insider Monkey, worth an estimated $124.1 million in stock, and Michael Rockefeller and KarláKroeker's Woodline Partners was right behind this move, as the fund dumped about $37.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 13 funds by the end of the second quarter.

Let's check out hedge fund activity in other stocks similar to Becton, Dickinson and Company (NYSE:BDX). These stocks are Illinois Tool Works Inc. (NYSE:ITW), Capital One Financial Corp. (NYSE:COF), Illumina, Inc. (NASDAQ:ILMN), Equinor ASA (NYSE:EQNR), Colgate-Palmolive Company (NYSE:CL), Blackstone Inc. (NYSE:BX), and HCA Healthcare Inc (NYSE:HCA). All of these stocks' market caps are closest to BDX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITW,45,657608,12 COF,64,4053972,5 ILMN,51,1973287,-1 EQNR,11,88633,3 CL,58,2368869,10 BX,54,2080104,5 HCA,60,2695782,-2 Average,49,1988322,4.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $1988 million. That figure was $3335 million in BDX's case. Capital One Financial Corp. (NYSE:COF) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 11 bullish hedge fund positions. Becton, Dickinson and Company (NYSE:BDX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BDX is 54.7. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 22.9% in 2021 through October 1st and beat the market again by 5.6 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 0.9% since the end of June (through 10/1) 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 many of these stocks already outperformed the market since 2019.

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