We recently published a list entitled Billionaire Israel Englander’s Top 10 Stock Picks for 2024. Since Merck & Co. Inc. (NYSE:MRK) ranks 2nd in the list, it deserves a deeper look.
Billionaire Israel Englander is one of the most notable hedge fund managers in America. He founded Millennium Management back in 1989. Today, the fund’s portfolio is worth over $234 billion. Englander nabbed the top spot in Bloomberg’s list of highest-earning hedge fund managers in 2023, with a whopping $2.8 billion in net earnings including gains from personal investments and fees. Earlier this year, Bloomberg reported that Izzy Englander’s Millennium Management earned $600 million from commodities investments last year. However, in a separate report, the publication said despite installing a new chief of its commodities and making big changes, Millennium’s commodities business is lagging behind Citadel (of billionaire Ken Griffin) which made a whopping $8 billion from commodities in 2022. Bloomberg said, citing sources, that part of the reason why Millennium is struggling to post big gains is billionaire Englander’s imposition of “tight guardrails” to limit losses. To make money in the commodities business, experts say, you have to take risks and give some freedom to traders. But Englander likes to be in control. A Financial Times report earlier this year said Millennium Management manages a whopping $60 billion in assets, employs 5,400 people and has 17 offices. Yet Englander owns 100% of the firm.
The report said, citing a person who works at the fund, that this major concentration is “not a good idea.”
The FT report said Englander’s fund was up 8.3% in 2023 through October, while it returned 12.5% in 2022, 13.6% in 2021 and an impressive 25.9% in 2020.
For this article, we scanned Millennium Management’s Q1 portfolio and picked the fund’s top 10 holdings. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Israel Englander of Millennium Management
Merck & Co. Inc. (NYSE:MRK)
Billionaire Israel Englander’s Stake Value: $1,328,664,191
Merck & Co. Inc. (NYSE:MRK) is one of the most promising stocks in billionaire Israel Englander’s Q1 portfolio. Millennium Management increased its position in the biotech company by 67% in the March quarter, ending the period with a $1.3 million stake. In April, Merck & Co. Inc. (NYSE:MRK) posted solid Q1 results and increased its full-year guidance driven by about 20% YoY rise in sales for its blockbuster cancer medicine Keytruda. Wall Street expects Merck & Co. Inc. (NYSE:MRK) 2025 EPS to come in at $9.95. Based on the stock’s current price, Merck & Co. Inc.’s (NYSE:MRK) forward P/E ratio is 13.13, compared to the industry average of 19.79 and lower than Merck’s 5-year average P/E of 18.67. Wall Street expects Merck & Co. Inc.’s (NYSE:MRK) revenue to jump 7.30% while earnings growth is expected to clock in at 15.00%. Wall Street estimates suggest Merck’s EPS will grow to $12.5 by the end of fiscal year 2028. This translates to a CAGR of 7.6% between fiscal years 2024 and 2028.
Analysts believe Merck & Co. Inc. (NYSE:MRK) has done a decent job at diversifying its drug portfolio and expanding across different geographies. The company makes money from vaccines and immunotherapy drugs
Sales growth momentum of Keytruda is also expected to continue as the drug is patent-protected until 2028. Merck & Co. Inc. (NYSE:MRK) is also investing heavily into R&D to make new drugs for unmet medical needs, such as oncology and immuno-oncology. Average analyst price estimate for Merck & Co. Inc. (NYSE:MRK) is $142, which presents a 12% upside potential from the current levels.
Carillon Eagle Mid Cap Growth Fund made the following comment about Merck & Co., Inc. (NYSE:MRK) in its Q3 2023 investor letter:
“Merck & Co., Inc. (NYSE:MRK) underperformed in the third quarter, based on what we view as largely macroeconomic-related factors. The company continues to execute well, both clinically and fundamentally, but much of the biopharmaceutical industry has been weak as investors are gravitating to other, more cyclical sectors.”
Overall, Merck & Co. Inc. (NYSE:MRK) ranks 2nd on Insider Monkey’s list of Billionaire Israel Englander’s Top 10 Stock Picks for 2024. You can visit Billionaire Israel Englander’s Top 10 Stock Picks for 2024 to see other stocks in the list. While we acknowledge the potential of Merck & Co. Inc. (NYSE:MRK), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Merck & Co. Inc. (NYSE:MRK) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.