How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Anthem Inc (NYSE:ANTM) and determine whether hedge funds had an edge regarding this stock.
Anthem Inc (NYSE:ANTM) has experienced a decrease in hedge fund interest lately. Anthem Inc (NYSE:ANTM) was in 59 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 73. There were 67 hedge funds in our database with ANTM holdings at the end of June. Our calculations also showed that ANTM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Richard S. Pzena of Pzena Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to take a glance at the latest hedge fund action regarding Anthem Inc (NYSE:ANTM).
Do Hedge Funds Think ANTM Is A Good Stock To Buy Now?
At third quarter’s end, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. By comparison, 65 hedge funds held shares or bullish call options in ANTM a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Eagle Capital Management was the largest shareholder of Anthem Inc (NYSE:ANTM), with a stake worth $949.5 million reported as of the end of September. Trailing Eagle Capital Management was Orbis Investment Management, which amassed a stake valued at $640.5 million. Brave Warrior Capital, Farallon Capital, and AQR 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 Brave Warrior Capital allocated the biggest weight to Anthem Inc (NYSE:ANTM), around 17.9% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, setting aside 5.17 percent of its 13F equity portfolio to ANTM.
Since Anthem Inc (NYSE:ANTM) has witnessed falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedge funds that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Patrick Degorce’s Theleme Partners cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $126.1 million in stock. Brandon Haley’s fund, Holocene Advisors, also dumped its stock, about $67.4 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 8 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Anthem Inc (NYSE:ANTM) but similarly valued. We will take a look at ConocoPhillips (NYSE:COP), Analog Devices, Inc. (NASDAQ:ADI), U.S. Bancorp (NYSE:USB), Gilead Sciences, Inc. (NASDAQ:GILD), PetroChina Company Limited (NYSE:PTR), Automatic Data Processing (NASDAQ:ADP), and Uber Technologies, Inc. (NYSE:UBER). All of these stocks’ market caps match ANTM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COP | 49 | 1371142 | -1 |
| ADI | 74 | 5698767 | 12 |
| USB | 42 | 8390873 | 1 |
| GILD | 55 | 1751615 | 1 |
| PTR | 7 | 94903 | -1 |
| ADP | 43 | 3616230 | 2 |
| UBER | 143 | 10766637 | 8 |
| Average | 59 | 4527167 | 3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 59 hedge funds with bullish positions and the average amount invested in these stocks was $4527 million. That figure was $4586 million in ANTM’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 7 bullish hedge fund positions. Anthem Inc (NYSE:ANTM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ANTM is 40.4. 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 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 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on ANTM as the stock returned 18.6% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
