While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter 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 Boston Scientific Corporation (NYSE:BSX).
Is Boston Scientific Corporation (NYSE:BSX) undervalued? Investors who are in the know are selling. The number of long hedge fund bets shrunk by 2 recently. Our calculations also showed that BSX isn't among the 30 most popular stocks among hedge funds. BSX was in 48 hedge funds' portfolios at the end of September. There were 50 hedge funds in our database with BSX positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26082" align="aligncenter" width="466"] Andreas Halvorsen of Viking Global[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's analyze the recent hedge fund action encompassing Boston Scientific Corporation (NYSE:BSX).
What does smart money think about Boston Scientific Corporation (NYSE:BSX)?
At Q3's end, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BSX over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Viking Global was the largest shareholder of Boston Scientific Corporation (NYSE:BSX), with a stake worth $423.8 million reported as of the end of September. Trailing Viking Global was Marshall Wace, which amassed a stake valued at $344.4 million. Citadel Investment Group, OrbiMed Advisors, and Third Point 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 Grisanti Brown & Partners allocated the biggest weight to Boston Scientific Corporation (NYSE:BSX), around 4.4% of its portfolio. Blue Pool Capital is also relatively very bullish on the stock, earmarking 4.29 percent of its 13F equity portfolio to BSX.
Judging by the fact that Boston Scientific Corporation (NYSE:BSX) has experienced bearish sentiment from hedge fund managers, we can see that there was a specific group of money managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, Benjamin A. Smith's Laurion Capital Management dumped the largest position of all the hedgies followed by Insider Monkey, totaling about $41.7 million in stock. Per Johansson's fund, Bodenholm Capital, also sold off its stock, about $30.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Boston Scientific Corporation (NYSE:BSX) but similarly valued. These stocks are Eni SpA (NYSE:E), CSX Corporation (NASDAQ:CSX), Allergan plc (NYSE:AGN), and The Charles Schwab Corporation (NYSE:SCHW). This group of stocks' market values resemble BSX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position E,5,58328,0 CSX,38,4002726,-8 AGN,81,8207290,1 SCHW,52,3125721,4 Average,44,3848516,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $3849 million. That figure was $2372 million in BSX's case. Allergan plc (NYSE:AGN) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 5 bullish hedge fund positions. Boston Scientific Corporation (NYSE:BSX) 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately BSX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BSX were disappointed as the stock returned 2.9% during the fourth quarter (through 11/22) 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.
Disclosure: None. This article was originally published at Insider Monkey.