The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Eli Lilly and Company (NYSE:LLY) and determine whether the smart money was really smart about this stock.
Is Eli Lilly and Company (NYSE:LLY) undervalued? Hedge funds were getting more optimistic. The number of bullish hedge fund positions inched up by 8 recently. Eli Lilly and Company (NYSE:LLY) was in 51 hedge funds’ portfolios at the end of June. Our calculations also showed that LLY 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). There were 43 hedge funds in our database with LLY positions at the end of the first quarter.
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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s view the new hedge fund action regarding Eli Lilly and Company (NYSE:LLY).
What have hedge funds been doing with Eli Lilly and Company (NYSE:LLY)?
Heading into the third quarter of 2020, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the first quarter of 2020. On the other hand, there were a total of 43 hedge funds with a bullish position in LLY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Eli Lilly and Company (NYSE:LLY), worth close to $738.6 million, comprising 0.7% of its total 13F portfolio. The second most bullish fund manager is John Overdeck and David Siegel of Two Sigma Advisors, with a $392.4 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Huber Capital Management allocated the biggest weight to Eli Lilly and Company (NYSE:LLY), around 3.42% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 2.2 percent of its 13F equity portfolio to LLY.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most outsized position in Eli Lilly and Company (NYSE:LLY). Marshall Wace LLP had $26.8 million invested in the company at the end of the quarter. Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund also made a $14.8 million investment in the stock during the quarter. The other funds with brand new LLY positions are Peter Muller’s PDT Partners, Michael Castor’s Sio Capital, and Bhagwan Jay Rao’s Integral Health Asset Management.
Let’s now review hedge fund activity in other stocks similar to Eli Lilly and Company (NYSE:LLY). We will take a look at ASML Holding N.V. (NASDAQ:ASML), Novo Nordisk A/S (NYSE:NVO), NIKE, Inc. (NYSE:NKE), The Unilever Group (NYSE:UL), Thermo Fisher Scientific Inc. (NYSE:TMO), AstraZeneca plc (NYSE:AZN), and Amgen, Inc. (NASDAQ:AMGN). This group of stocks’ market valuations are closest to LLY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASML | 25 | 1961320 | -5 |
| NVO | 24 | 3294368 | 0 |
| NKE | 71 | 2603242 | -9 |
| UL | 13 | 149078 | 0 |
| TMO | 73 | 4525711 | -7 |
| AZN | 38 | 1920506 | 12 |
| AMGN | 51 | 1794209 | -1 |
| Average | 42.1 | 2321205 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.1 hedge funds with bullish positions and the average amount invested in these stocks was $2321 million. That figure was $2161 million in LLY’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 13 bullish hedge fund positions. Eli Lilly and Company (NYSE:LLY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LLY is 71.1. 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 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately LLY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on LLY were disappointed as the stock returned -9.2% 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.
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Disclosure: None. This article was originally published at Insider Monkey.
