The $98.24 billion biopharmaceutical company AbbVie Inc (NYSE:ABBV) has sparked the attention of quite a few hedge funds according to the data we compiled from the last round of 13F filings. Among the hedge funds that we track, a total of 79 had an aggregate investment of $6.11 billion in the company at the end of June, compared to 72 firms with $3.29 billion in shares at the end of the previous quarter. In terms of popularity, the company ranks among the top one percentile in our database of over 4000 companies, and the investors we track own 5.70% of the company’s outstanding shares as of June 30.
Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research have shown that hedge funds’ long stock picks generate strong risk adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks managed to return 118% over the last 36 months and outperformed the S&P 500 Index by over 60 percentage points (see the details here).
Larry Robbins‘ (pictured above) Glenview Capital significantly bolstered its stake in AbbVie Inc (NYSE:ABBV) during the second trimester to a whopping 17.86 million shares valued at $1.20 billion. The investment manager shed some light on the company’s future prospects in his first quarter letter to investors:
“AbbVie is projected by analysts to grow EPS at 20% per annum through 2017, and our models project them to grow at 28% per annum, fueled by the strong growth in their core Humira franchise, growth in their oncology and Hepatitis C franchises and the accretion coming from their pending acquisition of Pharmacyclics. Despite this strong growth, on our numbers, ABBV trades at only ~12x 2016 and 9.3x 2017 earnings per share. As you might guess, in this market there are no 20% growers for under 10x 2 year forward earnings, so your logical question should be “what’s wrong with the Company?”. The answer is the market is fearful of an earnings cliff post 2017 from potential generic competition coming from biosimilars to compete with Humira,” wrote Robbins.
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In its financial results for the second trimester AbbVie Inc (NYSE:ABBV) delivered EPS of $1.08, which was $0.02 higher than analysts’ consensus estimate, while revenues of $5.48 billion missed the estimated mark by $140 million, despite representing an increase of 11.2% on a year-over-year basis. While Glenview is the largest stockholder of the company within our database, it is followed by Baker Bros. Advisors, which is managed by Julian Baker and Felix Baker, and Samuel Isaly‘s Orbimed Advisors. While Baker Bros. initiated a holding in the company during the June trimester with some 14.37 million shares, Orbimed upped its stake by 39% to 6.67 million shares during the same quarter.
