Is AmerisourceBergen Corp. (ABC) Going to Burn These Hedge Funds?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like AmerisourceBergen Corp. (NYSE:ABC).

AmerisourceBergen Corp. (NYSE:ABC) investors should be aware of a decrease in hedge fund sentiment in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Delphi Automotive PLC (NYSE:DLPH), Tenaris S.A. (ADR) (NYSE:TS), and Continental Resources, Inc. (NYSE:CLR) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to check out the latest action regarding AmerisourceBergen Corp. (NYSE:ABC).

Hedge fund activity in AmerisourceBergen Corp. (NYSE:ABC)

Heading into the fourth quarter of 2016, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 12% from the second quarter of 2016. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, James Crichton’s Hitchwood Capital Management has the most valuable position in AmerisourceBergen Corp. (NYSE:ABC), worth close to $323.1 million, comprising 9.9% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $71.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and David Harding’s Winton Capital Management.

Seeing as AmerisourceBergen Corp. (NYSE:ABC) has witnessed a decline in interest from hedge fund managers, we can see that there was a specific group of funds who were dropping their full holdings in the third quarter. Intriguingly, Stephen DuBois’s Camber Capital Management sold off the largest stake of all the hedgies followed by Insider Monkey, worth close to $49.6 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dropped about $43.7 million worth of shares. These transactions are important to note, as total hedge fund interest fell by 5 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to AmerisourceBergen Corp. (NYSE:ABC). We will take a look at Delphi Automotive PLC (NYSE:DLPH), Tenaris S.A. (ADR) (NYSE:TS), Continental Resources, Inc. (NYSE:CLR), and Mead Johnson Nutrition CO (NYSE:MJN). This group of stocks’ market values match ABC’s market value.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $538 million. That figure was $880 million in ABC’s case. Continental Resources, Inc. (NYSE:CLR) is the most popular stock in this table. On the other hand Tenaris S.A. (ADR) (NYSE:TS) is the least popular one with only 10 bullish hedge fund positions. AmerisourceBergen Corp. (NYSE:ABC) 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 CLR might be a better candidate to consider a long position.