While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding The Boeing Company (NYSE:BA).
Is BA a good stock to buy? The Boeing Company (NYSE:BA) shareholders have witnessed an increase in hedge fund sentiment lately. The Boeing Company (NYSE:BA) was in 59 hedge funds' portfolios at the end of March. The all time high for this statistic is 83. There were 55 hedge funds in our database with BA holdings at the end of December. Our calculations also showed that BA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Phillip Gross of Adage Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell 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 take a gander at the fresh hedge fund action encompassing The Boeing Company (NYSE:BA).
Do Hedge Funds Think BA Is A Good Stock To Buy Now?
At the end of March, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the fourth quarter of 2020. By comparison, 54 hedge funds held shares or bullish call options in BA 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.
More specifically, Citadel Investment Group was the largest shareholder of The Boeing Company (NYSE:BA), with a stake worth $2130.5 million reported as of the end of March. Trailing Citadel Investment Group was Millennium Management, which amassed a stake valued at $372.2 million. Adage Capital Management, D E Shaw, and Laurion Capital 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 Heard Capital allocated the biggest weight to The Boeing Company (NYSE:BA), around 5.61% of its 13F portfolio. NWI Management is also relatively very bullish on the stock, setting aside 5.3 percent of its 13F equity portfolio to BA.
Consequently, some big names were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most valuable position in The Boeing Company (NYSE:BA). Laurion Capital Management had $88 million invested in the company at the end of the quarter. James Crichton's Hitchwood Capital Management also made a $50.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Kevin D. Eng's Columbus Hill Capital Management, Steve Cohen's Point72 Asset Management, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as The Boeing Company (NYSE:BA) but similarly valued. These stocks are NextEra Energy, Inc. (NYSE:NEE), United Parcel Service, Inc. (NYSE:UPS), Union Pacific Corporation (NYSE:UNP), Unilever PLC (NYSE:UL), Linde plc (NYSE:LIN), BHP Group (NYSE:BBL), and Morgan Stanley (NYSE:MS). This group of stocks' market valuations resemble BA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NEE,63,2725995,2 UPS,44,1346598,-4 UNP,75,4685045,7 UL,20,826829,-5 LIN,43,4636270,-7 BBL,23,1353821,5 MS,79,5285168,13 Average,49.6,2979961,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.6 hedge funds with bullish positions and the average amount invested in these stocks was $2980 million. That figure was $1438 million in BA's case. Morgan Stanley (NYSE:MS) is the most popular stock in this table. On the other hand Unilever PLC (NYSE:UL) is the least popular one with only 20 bullish hedge fund positions. The Boeing Company (NYSE:BA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BA is 63.4. 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 17.2% in 2021 through June 11th and beat the market again by 3.3 percentage points. Unfortunately BA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BA were disappointed as the stock returned -2.9% since the end of March (through 6/11) 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.