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Hedge Funds Are Selling Becton, Dickinson and Company (BDX)

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  • BDX

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Becton, Dickinson and Company (NYSE:BDX).

Is Becton, Dickinson and Company (NYSE:BDX) undervalued? Hedge funds were taking a pessimistic view. The number of long hedge fund bets were trimmed by 1 in recent months. Becton, Dickinson and Company (NYSE:BDX) was in 51 hedge funds' portfolios at the end of September. The all time high for this statistic is 65. Our calculations also showed that BDX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we're going to view the new hedge fund action surrounding Becton, Dickinson and Company (NYSE:BDX).

Arthur B Cohen and Joseph Healey of Healthcor Management LP

Do Hedge Funds Think BDX Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the second quarter of 2021. On the other hand, there were a total of 62 hedge funds with a bullish position in BDX a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Generation Investment Management held the most valuable stake in Becton, Dickinson and Company (NYSE:BDX), which was worth $932.8 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $274.9 million worth of shares. Impax Asset Management, Intermede Investment Partners, and Bridgewater Associates 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 Columbus Point allocated the biggest weight to Becton, Dickinson and Company (NYSE:BDX), around 6.67% of its 13F portfolio. Generation Investment Management is also relatively very bullish on the stock, setting aside 3.88 percent of its 13F equity portfolio to BDX.

Because Becton, Dickinson and Company (NYSE:BDX) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few fund managers that elected to cut their positions entirely last quarter. Interestingly, Terry Smith's Fundsmith LLP said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, worth an estimated $1052.7 million in stock. Kenneth Tropin's fund, Graham Capital Management, also said goodbye to its stock, about $12.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Becton, Dickinson and Company (NYSE:BDX) but similarly valued. These stocks are Edwards Lifesciences Corporation (NYSE:EW), Vale SA (NYSE:VALE), DoorDash, Inc. (NYSE:DASH), CME Group Inc (NASDAQ:CME), Cigna Corporation (NYSE:CI), Westpac Banking Corporation (NYSE:WBK), and Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR). This group of stocks' market values are similar to BDX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EW,43,2169239,-4 VALE,27,1979876,0 DASH,42,9358288,-3 CME,64,2686424,2 CI,58,2302081,-5 WBK,6,34160,2 PBR,23,3004383,-2 Average,37.6,3076350,-1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.6 hedge funds with bullish positions and the average amount invested in these stocks was $3076 million. That figure was $2340 million in BDX's case. CME Group Inc (NASDAQ:CME) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 6 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. Our overall hedge fund sentiment score for BDX is 66.3. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately BDX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BDX were disappointed as the stock returned -3.5% since the end of September (through 11/30) 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.