Even though the market recovered from the third-quarter slump during the last three months of 2015, with the S&P 500 gaining around 8% between October and December, the decline in oil prices and fears of a slowdown in global economic growth still creates some uncertainty for investors. Among the funds we track, we also noticed some interesting trends and in this article, we are going to take a closer look at the smart money sentiment towards McKesson Corporation (NYSE:MCK), according to the latest round of 13F filings.
McKesson Corporation (NYSE:MCK) shareholders have witnessed a decrease in hedge fund interest lately. At the end of this article we will also compare MCK to other stocks, including The Bank of New York Mellon Corporation (NYSE:BK), Target Corporation (NYSE:TGT), and Statoil ASA (ADR) (NYSE:STO) to get a better sense of its popularity.
Follow Mckesson Corp (NYSE:MCK)
Follow Mckesson Corp (NYSE:MCK)
In the eyes of most traders, hedge funds are perceived as unimportant, outdated financial vehicles of years past. While there are over 8000 funds trading at present, We choose to focus on the elite of this group, approximately 800 funds. These investment experts preside over the majority of all hedge funds’ total capital, and by paying attention to their finest equity investments, Insider Monkey has formulated a number of investment strategies that have historically surpassed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.
One of the funds betting on McKesson is Herbert Abramson and Randall Abramson’s Trapeze Asset Management, which discussed the company in its third-quarter letter to investors. Read on to see the fund’s comments.
“McKesson is the largest amongst the three player U.S. pharmaceutical distributors. The industry enjoys significant barriers to entry, as size and scale of network are paramount. With the recent Walgreens Boots Alliance bid for Rite Aid, which accelerated the share price weakness of McKesson, we took notice and initiated a position. Even if Rite Aid is acquired, a big ‘if’ due to competitive issues, McKesson stands to lose less than 10% of its net income. Because of the ongoing client attrition and Rite Aid headlines, the market appears to have overlooked potential flow through of generic pricing to McKesson’s income statement and added synergies from recent acquisitions. We estimate McKesson’s value at $220, even assuming the Rite Aid contract is completely lost.”
Keeping this in mind, we’re going to take a gander at the latest action surrounding McKesson Corporation (NYSE:MCK).
What have hedge funds been doing with McKesson Corporation (NYSE:MCK)?
At the end of the fourth quarter, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Viking Global, managed by Andreas Halvorsen, holds the biggest position in McKesson Corporation (NYSE:MCK). Viking Global has a $544.7 million position in the stock, comprising 2.1% of its 13F portfolio. On Viking Global’s heels is Glenview Capital, led by Larry Robbins, holding a $432.5 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Other professional money managers that are bullish consist of Cliff Asness’ AQR Capital Management, John Smith Clark’s Southpoint Capital Advisors and Donald Chiboucis’s Columbus Circle Investors.
Seeing as McKesson Corporation (NYSE:MCK) has experienced a decline in interest from the smart money, logic holds that there were a few fund managers that decided to sell off their full holdings by the end of the fourth quarter. Intriguingly, Jim Simons’ Renaissance Technologies dropped the biggest position of all the hedgies followed by Insider Monkey, worth an estimated $99.1 million in stock. Arthur B Cohen and Joseph Healey’s fund, Healthcor Management LP, also cut its stock, about $50.9 million worth. These moves are interesting, as total hedge fund interest was cut by five funds by the end of 2015.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as McKesson Corporation (NYSE:MCK) but similarly valued. We will take a look at The Bank of New York Mellon Corporation (NYSE:BK), Target Corporation (NYSE:TGT), Statoil ASA (ADR) (NYSE:STO), and Canadian National Railway (USA) (NYSE:CNI). This group of stocks’ market valuations are similar to MCK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BK | 49 | 5932051 | 0 |
| TGT | 38 | 1291957 | -6 |
| STO | 8 | 135245 | -2 |
| CNI | 12 | 1240792 | -5 |
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $2.15 billion. That figure was $3.07 billion in MCK’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand Statoil ASA (ADR) (NYSE:STO) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks McKesson Corporation (NYSE:MCK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
