Replies to post #168 on Boston Scientific Corp (BSX)

[T695]

Think I’ll get some calls here soon

[conix]

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


Insider Monkey•October 20, 2020

Is Boston Scientific Corporation (NYSE:BSX) a splendid stock to buy now? Money managers were taking a bullish view. The number of bullish hedge fund bets rose by 7 in recent months. Boston Scientific Corporation (NYSE:BSX) was in 66 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 59. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BSX isn't among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we're going to take a gander at the latest hedge fund action encompassing Boston Scientific Corporation (NYSE:BSX).


What have hedge funds been doing with Boston Scientific Corporation (NYSE:BSX)?

At Q2's end, a total of 66 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the first quarter of 2020. By comparison, 50 hedge funds held shares or bullish call options in BSX a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in Boston Scientific Corporation (NYSE:BSX) was held by Viking Global, which reported holding $648 million worth of stock at the end of September. It was followed by Steadfast Capital Management with a $325.1 million position. Other investors bullish on the company included OrbiMed Advisors, Marshall Wace LLP, and D E Shaw. In terms of the portfolio weights assigned to each position Parsifal Capital Management allocated the biggest weight to Boston Scientific Corporation (NYSE:BSX), around 6.56% of its 13F portfolio. Blue Whale Capital is also relatively very bullish on the stock, designating 6.07 percent of its 13F equity portfolio to BSX.

As aggregate interest increased, specific money managers were leading the bulls' herd. Bloom Tree Partners, managed by Alok Agrawal, created the most outsized position in Boston Scientific Corporation (NYSE:BSX). Bloom Tree Partners had $41.6 million invested in the company at the end of the quarter. Stephen J. Errico's Locust Wood Capital Advisers also initiated a $37.2 million position during the quarter. The following funds were also among the new BSX investors: Jeremy Green's Redmile Group, Paul Marshall and Ian Wace's Marshall Wace LLP, and Daniel S. Och's OZ Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Boston Scientific Corporation (NYSE:BSX) but similarly valued. These stocks are Intercontinental Exchange Inc (NYSE:ICE), The Bank of Nova Scotia (NYSE:BNS), Newmont Corporation (NYSE:NEM), Deere & Company (NYSE:DE), Mercadolibre Inc (NASDAQ:MELI), Kimberly Clark Corporation (NYSE:KMB), and ABB Ltd (NYSE:ABB). All of these 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 ICE,60,2754652,-1 BNS,13,252173,1 NEM,55,2418239,12 DE,32,839882,-12 MELI,60,4427510,0 KMB,37,1173794,-9 ABB,10,346451,0 Average,38.1,1744672,-1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1745 million. That figure was $2313 million in BSX's case. Intercontinental Exchange Inc (NYSE:ICE) is the most popular stock in this table. On the other hand ABB Ltd (NYSE:ABB) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Boston Scientific Corporation (NYSE:BSX) is more popular among hedge funds. Our overall hedge fund sentiment score for BSX is 90. 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. 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 29.2% in 2020 through October 16th and still beat the market by 19.7 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 9.5% since the end of the second quarter (through 10/16) 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 most of these stocks already outperformed the market in 2020.

[conix]

During 2020 BSX’s stock price has faced several headwinds. The medical device industry (typically seen as a secular growth and less cyclical industry) was hit hard by deferrals of more elective procedures due to the COVID-19 pandemic. Sales dropped 20 to 30% in the 2nd quarter as people around the world were locked down. Boston Scientific’s management team, out of an abundance of caution, raised equity in May leaving technical pressure on the stock.

The most recent challenge for BSX was the announcement that the company was shutting down its Lotus Edge heart valve program. The stock dropped 8.3% the day of the announcement. These challenges have resulted in sub-par performance of the stock. At the time of writing, Boston Scientific is down 22.87% YTD, while the S&P is up 17.71% and the S&P 500 Healthcare Sector is up 11.64%.

The pandemic has skewed the growth numbers and shutting down the LOTUS program has lowered the company’s growth prospects, but the story driving growth in EPS and free cash flow still remains intact. Management remains confidence that the business can grow the top-line 6 to 8% organically and expand operating margins 50 to 100bps y/y for the next couple of years (using 2019 as a base year). Based on the assumption that 2022 is a completely normalized year, it is not unreasonable for BSX to do $1.97 in EPS in 2021. A 6% to 8% topline growth rate puts BSX at the top of its peer growth in terms of growth profile which on average trade at ~23x earnings.

Applying a 23x multiple to $1.97 in EPS gets you a $45.30 stock in a year representing a 29.7% return from current trading levels. Your downside is probably around $33, down ~5%.

[conix]

Averaging down on BSX turned out to be smart. Just took a few months as the pandemic lifts and the elective surgeries start up again.

[conix]

Boston Scientific EPS beats by $0.06, beats on revenue

Apr. 28, 2021

By: Gaurav Batavia, SA News Editor

Boston Scientific (NYSE:BSX): Q1 Non-GAAP EPS of $0.37 beats by $0.06; GAAP EPS of $0.23 beats by $0.12.

Revenue of $2.75B (+8.3% Y/Y) beats by $130M.

FY21 Guidance: The company now estimates earnings on a GAAP basis in a range of $0.81 to $0.88 per share and estimates adjusted earnings, excluding certain charges (credits), of $1.53 to $1.60 per share vs. $1.54 consensus. The company now estimates net sales growth for the full year 2021, versus the prior year period, to be in a range of approximately 16 to 19 percent on a reported basis, and approximately 15 to 18 percent on an organic basis.

Q2 Guidance: The company estimates earnings on a GAAP basis in a range of $0.16 to $0.18 per share and adjusted earnings, excluding certain charges (credits), of $0.36 to $0.38 per share vs. $0.35 consensus. The company estimates net sales growth for the second quarter of 2021, versus the prior year period, to be in a range of approximately 46 to 50 percent on a reported basis and approximately 44 to 48 percent on an organic basis.
Shares +2.2% PM.