We recently published a list of 10 Best Big-Name Stocks to Buy Right Now According to Short Sellers. In this article, we are going to take a look at where AstraZeneca PLC (NASDAQ:AZN) stands against the other big name stocks.
In early April 2024, Goldman Sachs Inc.’s data revealed that short selling on individual US-listed stocks was at the highest level in 6 months, and the most targeted sectors were technology, telecom, and media. This increase in short positions was seen after the significant ~9% advance seen in 1Q 2024 for the S&P 500. As per the data, some hedge funds that were using long-short equity strategies have started to fight the rally.
During extreme market volatility, short selling has become pronounced and has drawn significant interest from institutional and retail investors. It has prompted regulatory intervention as new reporting requirements have been issued by the SEC to offer transparency and ensure the availability of short position data.
Recent Trends in Short Selling
In the 2Q 2024, the US and Canadian markets saw an increase of ~$58 billion in short interest or a rise of 5.1% from the previous quarter.
Recently, S3 Partners, a renowned tracker of short-interest data, reported that the sectors that saw the largest increases in short exposure in 2Q 2024 included information technology (a rise of $49.3 billion), communication services (at $11.2 billion), and utilities (a rise of $3.7 billion) from the previous quarter. The sectors that saw the largest decrease in short exposure were the energy and financial sectors, down $12.3 billion and $1.6 billion, respectively.
Earlier in 2024, a significant surge in the leading AI giant resulted in losses of ~$3 billion for the short sellers. Some market experts even described this as an “AI-generated nightmare.”
In global equities, short interest climbed during July 2024, with strong increases seen throughout the Automobile (+13bps), REITs (+11bps), and Consumer Durables (+11bps) sectors, reported S&P Global. On the other hand, the largest decreases were in the Financial Services (-10bps) and Real Estate Management and Development (-4bps) sectors.
Talking about the US equities, the average short interest decreased to 77 basis points during July 2024. Significant increases in short interest were seen throughout REITs (+6 basis points) and the Household and Personal Products (+8 basis points) sectors. Conversely, the largest declines were in the Financial Services (-15 basis points) and the Automobile (-9 basis points) sectors.
Heavily Shorted Stocks Might Not Always Be in Distress, Says S3 Partners
S3 Partners revealed that there is a relatively weak correlation between short positions in certain assets and distress measures. This means that not all heavily shorted stocks are facing difficulties. As per the firm, broader market sentiments and valuation concerns are some of the factors that can drive short interest.
The company believes that shorting an asset can form part of broader strategies or hedging activities not linked to distress. It mentioned that there can be 3 measures of bearishness for stocks —- average analyst ratings (From 1 to 5), Credit default swap (CDS) spreads, and Altman Z-Score.
For example, the US Dollar had a low short position of ~1.32%. However, it had a high CDS spread of 1000 basis points. This indicates high perceived distress on the currency even though there is minimal short interest. This can be because of factors such as currency market dynamics or investor sentiments.
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A pharmacy worker distributing prescription medicines to patientsreceiving treatment for oncology, cardiovascular, renal, metabolism and respiratory diseases.
AstraZeneca PLC (NASDAQ:AZN)
Number of Hedge Fund Holders: 49
Short % of Shares Outstanding (August 15, 2024): 0.27%
AstraZeneca PLC (NASDAQ:AZN) is a global science-led biopharmaceutical company, focusing on the discovery development, and commercialization of prescription medicines.
AstraZeneca PLC (NASDAQ:AZN) seems to be well-placed for long-term growth given the patent-protected drugs and the developing pipeline. Also, the strong replenishment of new drugs should act as a critical tailwind. Notably, the smart strategic decisions on drug pricing and product governance are expected to support the company’s revenue growth.
AstraZeneca PLC (NASDAQ:AZN) continues to focus on lowering the liability risks associated with its portfolio as it focuses more on life-threatening diseases with acute treatment. The company’s top line is expected to be supported by the drugs which are less probable litigation targets.
Strong pricing power concerning AstraZeneca PLC (NASDAQ:AZN)’s portfolio of drugs should continue to act as a core pillar for the leading pharmaceutical giant. As we know, pricing dynamics tend to have a significant impact on public access to basic healthcare services, and this company enjoys a history of fair US price increases when it comes to its oncology portfolio.
AstraZeneca PLC (NASDAQ:AZN) upgraded its full-year guidance to mid-teens percentage increases in both total revenue and core EPS. This reflects its underlying business strength. The critical growth drivers include positive phase 3 trial results, new drug approvals, and healthy performance seen across major markets like the US, Europe, and China.
Analysts at TD Cowen upped their target price on the shares of AstraZeneca PLC (NASDAQ: AZN) from $90.00 to $95.00, giving it a “Buy” rating on 12th August. As per Insider Monkey’s 2Q 2024 database, 49 hedge funds held stakes in AstraZeneca PLC (NASDAQ:AZN).
Baron Funds, an investment management company, released its second quarter 2024 investor letter. Here is what the fund said:
“Performance in pharmaceuticals and health care distributors was bolstered by solid gains from AstraZeneca PLC (NASDAQ:AZN) and McKesson Corporation, respectively. AstraZeneca is a global biopharmaceutical company with a focus on three main therapy areas based on its core competencies: oncology, cardiovascular and metabolic diseases, and respiratory illnesses. AstraZeneca’s shares increased given incremental positive news flow (LAURA, ADRIATIC, and DESTINY-Breast06 clinical trials) surrounding the oncology franchise. The company also published long-term guidance for the first time, projecting $80 billion in revenue by 2030, or 75% higher than 2023’s $45.8 billion. This projection implies an annual growth rate of 8% over seven years, compared with the 5% to 7% targets set by GSK and Johnson & Johnson and the 5% target set by Novartis.”
Overall AZN ranks 1st on our list of the best big name stocks to buy according to short sellers. While we acknowledge the potential of AZN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
