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Were Hedge Funds Right About Boston Scientific Corporation (BSX)?

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  • BSX

In this article we are going to use hedge fund sentiment as a tool and determine whether Boston Scientific Corporation (NYSE:BSX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Boston Scientific Corporation (NYSE:BSX) has experienced an increase in support from the world's most elite money managers in recent months. Boston Scientific Corporation (NYSE:BSX) was in 51 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 66. There were 44 hedge funds in our database with BSX holdings at the end of March. Our calculations also showed that BSX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to take a peek at the new hedge fund action surrounding Boston Scientific Corporation (NYSE:BSX).

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

At the end of June, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BSX over the last 24 quarters. 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 BSX A Good Stock To Buy?
Is BSX A Good Stock To Buy?

More specifically, Viking Global was the largest shareholder of Boston Scientific Corporation (NYSE:BSX), with a stake worth $569.4 million reported as of the end of June. Trailing Viking Global was Farallon Capital, which amassed a stake valued at $543.8 million. OrbiMed Advisors, Two Sigma Advisors, and Citadel Investment Group 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 Locust Wood Capital Advisers allocated the biggest weight to Boston Scientific Corporation (NYSE:BSX), around 4.21% of its 13F portfolio. OrbiMed Advisors is also relatively very bullish on the stock, earmarking 2.99 percent of its 13F equity portfolio to BSX.

Consequently, some big names have jumped into Boston Scientific Corporation (NYSE:BSX) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the largest position in Boston Scientific Corporation (NYSE:BSX). Balyasny Asset Management had $74.1 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker's Woodline Partners also made a $44.9 million investment in the stock during the quarter. The other funds with brand new BSX positions are Brandon Haley's Holocene Advisors, Brian Ashford-Russell and Tim Woolley's Polar Capital, and OrbiMed Advisors.

Let's now review hedge fund activity in other stocks similar to Boston Scientific Corporation (NYSE:BSX). We will take a look at Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Dominion Energy Inc. (NYSE:D), Ford Motor Company (NYSE:F), ICICI Bank Limited (NYSE:IBN), Waste Management, Inc. (NYSE:WM), Eaton Corporation plc (NYSE:ETN), and Workday Inc (NYSE:WDAY). This group of stocks' market valuations resemble BSX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position REGN,48,1595301,9 D,34,1262051,-5 F,55,2106196,6 IBN,28,2473600,-3 WM,39,3600334,7 ETN,40,1062179,-9 WDAY,72,5187481,3 Average,45.1,2469592,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.1 hedge funds with bullish positions and the average amount invested in these stocks was $2470 million. That figure was $3029 million in BSX's case. Workday Inc (NYSE:WDAY) is the most popular stock in this table. On the other hand ICICI Bank Limited (NYSE:IBN) is the least popular one with only 28 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. Our overall hedge fund sentiment score for BSX is 59.3. 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 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately BSX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BSX were disappointed as the stock returned 0.9% since the end of June (through 11/5) 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.