We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Boston Scientific Corporation (NYSE:BSX) and determine whether hedge funds skillfully traded this stock.
Is Boston Scientific Corporation (NYSE:BSX) going to take off soon? Investors who are in the know were taking a bullish view. The number of bullish hedge fund positions inched up by 5 in recent months. Our calculations also showed that BSX 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's take a gander at the key hedge fund action encompassing Boston Scientific Corporation (NYSE:BSX).
What have hedge funds been doing with Boston Scientific Corporation (NYSE:BSX)?
At Q1's end, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BSX over the last 18 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Viking Global, managed by Andreas Halvorsen, holds the most valuable position in Boston Scientific Corporation (NYSE:BSX). Viking Global has a $1.0382 billion position in the stock, comprising 5.4% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $282.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass Samuel Isaly's OrbiMed Advisors, Aaron Cowen's Suvretta Capital Management and Robert Pitts's Steadfast Capital Management. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to Boston Scientific Corporation (NYSE:BSX), around 7.57% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, setting aside 6.9 percent of its 13F equity portfolio to BSX.
As aggregate interest increased, key hedge funds were breaking ground themselves. Steadfast Capital Management, managed by Robert Pitts, assembled the most outsized position in Boston Scientific Corporation (NYSE:BSX). Steadfast Capital Management had $131.1 million invested in the company at the end of the quarter. Larry Robbins's Glenview Capital also made a $77.9 million investment in the stock during the quarter. The other funds with brand new BSX positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, James Dinan's York Capital Management, and Henrik Rhenman's Rhenman & Partners Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Boston Scientific Corporation (NYSE:BSX) but similarly valued. We will take a look at Illinois Tool Works Inc. (NYSE:ITW), Ecolab Inc. (NYSE:ECL), Intercontinental Exchange Inc (NYSE:ICE), and CSX Corporation (NYSE:CSX). This group of stocks' market caps match BSX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITW,34,296563,2 ECL,38,1597530,-6 ICE,61,2491084,9 CSX,57,2811477,11 Average,47.5,1799164,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.5 hedge funds with bullish positions and the average amount invested in these stocks was $1799 million. That figure was $3081 million in BSX's case. Intercontinental Exchange Inc (NYSE:ICE) is the most popular stock in this table. On the other hand Illinois Tool Works Inc. (NYSE:ITW) is the least popular one with only 34 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. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately BSX wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BSX were disappointed as the stock returned 7.6% 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.
Get real-time email alerts: Follow Boston Scientific Corp (NYSE:BSX)
Disclosure: None. This article was originally published at Insider Monkey.