While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding AbbVie Inc (NYSE:ABBV).
Is AbbVie Inc (NYSE:ABBV) a good stock to buy now? ABBV has experienced a decrease in hedge fund sentiment recently. AbbVie Inc (NYSE:ABBV) was in 82 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 89. Our calculations also showed that ABBV isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a gander at the recent hedge fund action surrounding AbbVie Inc (NYSE:ABBV).
How are hedge funds trading AbbVie Inc (NYSE:ABBV)?
Heading into the fourth quarter of 2020, a total of 82 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 68 hedge funds with a bullish position in ABBV a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Berkshire Hathaway, managed by Warren Buffett, holds the biggest position in AbbVie Inc (NYSE:ABBV). Berkshire Hathaway has a $1.8625 billion position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, with a $1.1799 billion position; the fund has 1.2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include William B. Gray’s Orbis Investment Management, John Overdeck and David Siegel’s Two Sigma Advisors and Farallon Capital. In terms of the portfolio weights assigned to each position Copernicus Capital Management allocated the biggest weight to AbbVie Inc (NYSE:ABBV), around 12.38% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, designating 10.1 percent of its 13F equity portfolio to ABBV.
Because AbbVie Inc (NYSE:ABBV) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few hedgies who sold off their positions entirely by the end of the third quarter. Interestingly, Robert Pohly’s Samlyn Capital cut the biggest stake of all the hedgies watched by Insider Monkey, totaling close to $34.1 million in stock. Alex Denner’s fund, Sarissa Capital Management, also dropped its stock, about $30.5 million worth. These moves are important to note, as total hedge fund interest was cut by 7 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to AbbVie Inc (NYSE:ABBV). We will take a look at Danaher Corporation (NYSE:DHR), Amgen, Inc. (NASDAQ:AMGN), Broadcom Inc (NASDAQ:AVGO), Exxon Mobil Corporation (NYSE:XOM), United Parcel Service, Inc. (NYSE:UPS), T-Mobile US, Inc. (NYSE:TMUS), and Accenture Plc (NYSE:ACN). This group of stocks’ market valuations resemble ABBV’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DHR | 75 | 4702628 | -1 |
| AMGN | 45 | 1220712 | -6 |
| AVGO | 59 | 2374856 | 0 |
| XOM | 52 | 1380236 | -1 |
| UPS | 57 | 1731232 | 20 |
| TMUS | 94 | 7538763 | -19 |
| ACN | 46 | 1148986 | 2 |
| Average | 61.1 | 2871059 | -0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 61.1 hedge funds with bullish positions and the average amount invested in these stocks was $2871 million. That figure was $6293 million in ABBV’s case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand Amgen, Inc. (NASDAQ:AMGN) is the least popular one with only 45 bullish hedge fund positions. AbbVie Inc (NYSE:ABBV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABBV is 63.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on ABBV as the stock returned 21.4% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Abbvie Inc. (NYSE:ABBV)
Follow Abbvie Inc. (NYSE:ABBV)
Disclosure: None. This article was originally published at Insider Monkey.
