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Were Hedge Funds Behind The Huge Decline in The Boeing Company (BA) Shares?

Debasis Saha
·6 mins read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards The Boeing Company (NYSE:BA).

The Boeing Company (NYSE:BA) was in 54 hedge funds' portfolios at the end of the first quarter of 2020. BA investors should pay attention to a huge decrease in support from the world's most elite money managers of late. There were 82 hedge funds in our database with BA holdings at the end of the previous quarter. Our calculations also showed that BA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Boeing was among the biggest losers of the coronavirus pandemic. Its once high flying stock lost more than two thirds of its value recently. Hedge funds weren't the primary reason why BA shares plunged during the first quarter, but the exodus of hedge funds in such a short time period clearly contributed to the magnitude of the declines in Boeing shares. The stock's reaction during the second quarter indicates that hedge funds might have not been done selling. However, we believe it is good news for long-term investors. If you don't mind short term pain, Boeing will probably be among the best performing large-cap stocks over the next 2-3 years.

[caption id="attachment_530612" align="aligncenter" width="400"] Frank Brosens of Taconic Capital[/caption]

Frank Brosens Taconic Capital
Frank Brosens Taconic Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the fresh hedge fund action surrounding The Boeing Company (NYSE:BA).

What does smart money think about The Boeing Company (NYSE:BA)?

Heading into the second quarter of 2020, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of -34% from the previous quarter. By comparison, 71 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.

Is BA A Good Stock To Buy?
Is BA A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of The Boeing Company (NYSE:BA), with a stake worth $557.5 million reported as of the end of September. Trailing Citadel Investment Group was Taconic Capital, which amassed a stake valued at $126.8 million. Canyon Capital Advisors, Theleme Partners, and Pentwater 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 Scion Asset Management allocated the biggest weight to The Boeing Company (NYSE:BA), around 10.42% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, earmarking 9.09 percent of its 13F equity portfolio to BA.

Judging by the fact that The Boeing Company (NYSE:BA) has faced declining sentiment from the smart money, we can see that there lies a certain "tier" of fund managers that slashed their positions entirely in the third quarter. It's worth mentioning that Stuart Powers's Hengistbury Investment Partners dropped the largest position of all the hedgies watched by Insider Monkey, worth about $136.5 million in stock. Larry Robbins's fund, Glenview Capital, also dumped its stock, about $135.8 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 28 funds in the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as The Boeing Company (NYSE:BA) but similarly valued. These stocks are BP plc (NYSE:BP), United Technologies Corporation (NYSE:UTX), United Parcel Service, Inc. (NYSE:UPS), and 3M Company (NYSE:MMM). This group of stocks' market valuations are closest to BA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BP,31,877653,-9 UTX,62,4025728,-19 UPS,48,842540,6 MMM,44,516510,-2 Average,46.25,1565608,-6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $1566 million. That figure was $877 million in BA's case. United Technologies Corporation (NYSE:UTX) is the most popular stock in this table. On the other hand BP plc (NYSE:BP) is the least popular one with only 31 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately BA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BA were disappointed as the stock returned -7.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.

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