How do we determine whether Becton, Dickinson and Company (NYSE:BDX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Becton, Dickinson and Company (NYSE:BDX) investors should pay attention to an increase in hedge fund sentiment lately. BDX was in 40 hedge funds' portfolios at the end of June. There were 35 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 (see the video at the end of this article).
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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the latest hedge fund action surrounding Becton, Dickinson and Company (NYSE:BDX).
How have hedgies been trading Becton, Dickinson and Company (NYSE:BDX)?
At the end of the second quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BDX over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Cantillon Capital Management was the largest shareholder of Becton, Dickinson and Company (NYSE:BDX), with a stake worth $312.1 million reported as of the end of March. Trailing Cantillon Capital Management was Citadel Investment Group, which amassed a stake valued at $215.7 million. Generation Investment Management, Adage Capital Management, and Intermede Investment Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have jumped into Becton, Dickinson and Company (NYSE:BDX) headfirst. Citadel Investment Group, managed by Ken Griffin, established the biggest position in Becton, Dickinson and Company (NYSE:BDX). Citadel Investment Group had $215.7 million invested in the company at the end of the quarter. Barry Dargan's Intermede Investment Partners also made a $76 million investment in the stock during the quarter. The other funds with new positions in the stock are Doug Silverman and Alexander Klabin's Senator Investment Group, Andrew Weiss's Weiss Asset Management, and Richard Chilton's Chilton Investment Company.
Let's also examine hedge fund activity in other stocks similar to Becton, Dickinson and Company (NYSE:BDX). We will take a look at Vale SA (NYSE:VALE), Canadian National Railway Company (NYSE:CNI), Chubb Limited (NYSE:CB), and ConocoPhillips (NYSE:COP). This group of stocks' market valuations are similar to BDX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VALE,21,1848374,-1 CNI,28,2303561,11 CB,25,501768,2 COP,57,3405838,3 Average,32.75,2014885,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $2015 million. That figure was $1254 million in BDX's case. ConocoPhillips (NYSE:COP) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 21 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 0.7% during the third quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.