Hedge Funds Are Selling Abbott Laboratories (ABT)

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Abbott Laboratories (NYSE:ABT) to find out whether there were any major changes in hedge funds’ views.

Abbott Laboratories (NYSE:ABT) was in 61 hedge funds’ portfolios at the end of June. The all time high for this statistic is 67. ABT has experienced a decrease in enthusiasm from smart money in recent months. There were 65 hedge funds in our database with ABT positions at the end of the first quarter. Our calculations also showed that ABT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Now we’re going to take a look at the fresh hedge fund action surrounding Abbott Laboratories (NYSE:ABT).

Do Hedge Funds Think ABT Is A Good Stock To Buy Now?

At second quarter’s end, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 67 hedge funds with a bullish position in ABT a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Abbott Laboratories (NYSE:ABT), which was worth $939.2 million at the end of the second quarter. On the second spot was Diamond Hill Capital which amassed $722.7 million worth of shares. BlueSpruce Investments, Two Sigma Advisors, and D E Shaw 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 BlueSpruce Investments allocated the biggest weight to Abbott Laboratories (NYSE:ABT), around 8.91% of its 13F portfolio. Coe Capital Management is also relatively very bullish on the stock, designating 3.11 percent of its 13F equity portfolio to ABT.

Seeing as Abbott Laboratories (NYSE:ABT) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedgies who sold off their entire stakes last quarter. Intriguingly, Daniel S. Och’s OZ Management dropped the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at about $148.1 million in stock. Renaissance Technologies, also dumped its stock, about $43.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 4 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Abbott Laboratories (NYSE:ABT) but similarly valued. We will take a look at AT&T Inc. (NYSE:T), Novartis AG (NYSE:NVS), PepsiCo, Inc. (NASDAQ:PEP), Chevron Corporation (NYSE:CVX), AbbVie Inc (NYSE:ABBV), Thermo Fisher Scientific Inc. (NYSE:TMO), and Merck & Co., Inc. (NYSE:MRK). This group of stocks’ market values are closest to ABT’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 64.9 hedge funds with bullish positions and the average amount invested in these stocks was $4600 million. That figure was $4368 million in ABT’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 bullish hedge fund positions. Abbott Laboratories (NYSE:ABT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABT is 58.3. 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 25.7% in 2021 through September 27th and beat the market by 6.2 percentage points. A small number of hedge funds were also right about betting on ABT, though not to the same extent, as the stock returned 4.4% since the end of Q2 (through September 27th) and outperformed the market.

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Disclosure: None. This article was originally published at Insider Monkey.