Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Boston Properties, Inc. (NYSE:BXP) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 17 hedge funds' portfolios at the end of the fourth quarter of 2018. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as SK Telecom Co., Ltd. (NYSE:SKM), Cerner Corporation (NASDAQ:CERN), and Microchip Technology Incorporated (NASDAQ:MCHP) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a look at the recent hedge fund action encompassing Boston Properties, Inc. (NYSE:BXP).
How are hedge funds trading Boston Properties, Inc. (NYSE:BXP)?
At Q4's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BXP over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Boston Properties, Inc. (NYSE:BXP) was held by AEW Capital Management, which reported holding $168.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $50 million position. Other investors bullish on the company included Adage Capital Management, Millennium Management, and Renaissance Technologies.
Since Boston Properties, Inc. (NYSE:BXP) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies that slashed their positions entirely by the end of the third quarter. Intriguingly, Matthew Tewksbury's Stevens Capital Management said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at about $9.4 million in stock. Glenn Russell Dubin's fund, Highbridge Capital Management, also dropped its stock, about $4.9 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Boston Properties, Inc. (NYSE:BXP). We will take a look at SK Telecom Co., Ltd. (NYSE:SKM), Cerner Corporation (NASDAQ:CERN), Microchip Technology Incorporated (NASDAQ:MCHP), and Synchrony Financial (NYSE:SYF). This group of stocks' market values resemble BXP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SKM,6,88249,1 CERN,22,642762,-3 MCHP,30,425995,7 SYF,40,2307219,5 Average,24.5,866056,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $866 million. That figure was $348 million in BXP's case. Synchrony Financial (NYSE:SYF) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 6 bullish hedge fund positions. Boston Properties, Inc. (NYSE:BXP) is not the least popular stock in this group and hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on BXP, though not to the same extent, as the stock returned 17.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.