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Becton, Dickinson and Company (BDX) vs. Hedge Fund Favorites in 2019

Abigail Fisher

It has been a fantastic year for equity investors as Donald Trump pressured Federal Reserve to reduce interest rates and finalized the first leg of a trade deal with China. If you were a passive index fund investor, you had seen gains of 31% in your equity portfolio in 2019. However, if you were an active investor putting your money into hedge funds' favorite stocks, you had seen gains of more than 41%. In this article we are going to take a look at how hedge funds feel about a stock like Becton, Dickinson and Company (NYSE:BDX) and compare its performance against hedge funds' favorite stocks.

Becton, Dickinson and Company (NYSE:BDX) investors should pay attention to an increase in enthusiasm from smart money of late. BDX was in 44 hedge funds' portfolios at the end of the third quarter of 2019. There were 40 hedge funds in our database with BDX holdings at the end of the previous quarter. Our calculations also showed that BDX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_364853" align="aligncenter" width="594"] William Von Mueffling of Cantillon Capital Management[/caption]

William Von Mueffling - Cantillon Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to analyze the fresh hedge fund action surrounding Becton, Dickinson and Company (NYSE:BDX).

How are hedge funds trading Becton, Dickinson and Company (NYSE:BDX)?

At Q3's end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BDX over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

The largest stake in Becton, Dickinson and Company (NYSE:BDX) was held by Cantillon Capital Management, which reported holding $311.3 million worth of stock at the end of September. It was followed by GQG Partners with a $126.7 million position. Other investors bullish on the company included Generation Investment Management, Intermede Investment Partners, and Adage Capital Management. In terms of the portfolio weights assigned to each position Weiss Asset Management allocated the biggest weight to Becton, Dickinson and Company (NYSE:BDX), around 5% of its 13F portfolio. Grisanti Brown & Partners is also relatively very bullish on the stock, dishing out 4.31 percent of its 13F equity portfolio to BDX.

As industrywide interest jumped, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the largest position in Becton, Dickinson and Company (NYSE:BDX). Millennium Management had $55.9 million invested in the company at the end of the quarter. John Osterweis's Osterweis Capital Management also made a $20.6 million investment in the stock during the quarter. The following funds were also among the new BDX investors: Vishal Saluja and Pham Quang's Endurant Capital Management, Perella Weinberg Partners, and Michael Gelband's ExodusPoint Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Becton, Dickinson and Company (NYSE:BDX) but similarly valued. We will take a look at The TJX Companies, Inc. (NYSE:TJX), T-Mobile US, Inc. (NASDAQ:TMUS), Banco Santander, S.A. (NYSE:SAN), and Mitsubishi UFJ Financial Group Inc (NYSE:MUFG). This group of stocks' market valuations are closest to BDX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TJX,48,1965386,-2 TMUS,60,1457333,-18 SAN,20,645984,-2 MUFG,10,60064,-2 Average,34.5,1032192,-6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1032 million. That figure was $1160 million in BDX's case. T-Mobile US, Inc. (NASDAQ:TMUS) is the most popular stock in this table. On the other hand Mitsubishi UFJ Financial Group Inc (NYSE:MUFG) is the least popular one with only 10 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. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately BDX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BDX were disappointed as the stock returned 22.9% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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