We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Pfizer Inc. (NYSE:PFE).
Is PFE a good stock to buy? Pfizer Inc. (NYSE:PFE) has experienced an increase in support from the world’s most elite money managers of late. Pfizer Inc. (NYSE:PFE) was in 65 hedge funds’ portfolios at the end of March. The all time high for this statistic is 119. Our calculations also showed that PFE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
According to most investors, hedge funds are perceived as underperforming, outdated investment vehicles of the past. While there are more than 8000 funds in operation at present, We choose to focus on the bigwigs of this group, approximately 850 funds. These hedge fund managers administer most of all hedge funds’ total capital, and by tracking their best stock picks, Insider Monkey has discovered many investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Charles Clough of Clough Capital Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, advertising technology one of the fastest growing industries right now, so we are checking out stock pitches like this under-the-radar adtech stock that can deliver 10x gains. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s review the recent hedge fund action surrounding Pfizer Inc. (NYSE:PFE).
Do Hedge Funds Think PFE Is A Good Stock To Buy Now?
At the end of March, a total of 65 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the fourth quarter of 2020. On the other hand, there were a total of 67 hedge funds with a bullish position in PFE a year ago. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Diamond Hill Capital held the most valuable stake in Pfizer Inc. (NYSE:PFE), which was worth $407.3 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $387.2 million worth of shares. Citadel Investment Group, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to Pfizer Inc. (NYSE:PFE), around 8.07% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, setting aside 5.27 percent of its 13F equity portfolio to PFE.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Pfizer Inc. (NYSE:PFE). Marshall Wace LLP had $56.1 million invested in the company at the end of the quarter. Steven Boyd’s Armistice Capital also made a $43.5 million investment in the stock during the quarter. The other funds with brand new PFE positions are Charles Clough’s Clough Capital Partners, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Phill Gross and Robert Atchinson’s Adage Capital Management.
Let’s check out hedge fund activity in other stocks similar to Pfizer Inc. (NYSE:PFE). These stocks are Chevron Corporation (NYSE:CVX), PepsiCo, Inc. (NASDAQ:PEP), salesforce.com, inc. (NYSE:CRM), Merck & Co., Inc. (NYSE:MRK), Novartis AG (NYSE:NVS), AbbVie Inc (NYSE:ABBV), and Broadcom Inc (NASDAQ:AVGO). This group of stocks’ market values match PFE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CVX | 41 | 4866758 | -9 |
| PEP | 61 | 4882404 | 5 |
| CRM | 91 | 8837040 | -6 |
| MRK | 79 | 6494373 | -3 |
| NVS | 19 | 1709243 | -4 |
| ABBV | 72 | 5916781 | -11 |
| AVGO | 53 | 3313279 | -6 |
| Average | 59.4 | 5145697 | -4.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 59.4 hedge funds with bullish positions and the average amount invested in these stocks was $5146 million. That figure was $2014 million in PFE’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 19 bullish hedge fund positions. Pfizer Inc. (NYSE:PFE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PFE is 55.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Hedge funds were also right about betting on PFE as the stock returned 11.9% since the end of Q1 (through 6/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
