Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Merck & Co., Inc. (NYSE:MRK) a buy, sell, or hold? Prominent investors are in a bullish mood. The number of long hedge fund positions improved by 4 in recent months. Our calculations also showed that MRK isn’t among the 30 most popular stocks among hedge funds.
Today there are a lot of formulas shareholders use to appraise publicly traded companies. A pair of the most underrated formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outpace the S&P 500 by a solid margin (see the details here).
Let’s take a look at the latest hedge fund action encompassing Merck & Co., Inc. (NYSE:MRK).
How are hedge funds trading Merck & Co., Inc. (NYSE:MRK)?
Heading into the fourth quarter of 2018, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in MRK over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Merck & Co., Inc. (NYSE:MRK), which was worth $570.8 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $462 million worth of shares. Moreover, D E Shaw, AQR Capital Management, and Citadel Investment Group were also bullish on Merck & Co., Inc. (NYSE:MRK), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, specific money managers have jumped into Merck & Co., Inc. (NYSE:MRK) headfirst. Third Point, managed by Dan Loeb, created the most outsized position in Merck & Co., Inc. (NYSE:MRK). Third Point had $319.2 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $18.5 million position during the quarter. The following funds were also among the new MRK investors: Jeffrey Talpins’s Element Capital Management, Kamran Moghtaderi’s Eversept Partners, and Zach Schreiber’s Point State Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Merck & Co., Inc. (NYSE:MRK) but similarly valued. We will take a look at Toyota Motor Corporation (NYSE:TM), Citigroup Inc. (NYSE:C), Fomento Económico Mexicano, S.A.B. de C.V. (NYSE:FMX), and HSBC Holdings plc (NYSE:HSBC). All of these stocks’ market caps match MRK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TM | 9 | 120997 | -4 |
| C | 97 | 11409477 | 5 |
| FMX | 10 | 76872 | 0 |
| HSBC | 6 | 716155 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $3081 million. That figure was $5216 million in MRK’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 6 bullish hedge fund positions. Merck & Co., Inc. (NYSE:MRK) 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. In this regard C might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
