Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Walgreens Boots Alliance Inc (NASDAQ:WBA).
Is WBA stock a buy? Walgreens Boots Alliance Inc (NASDAQ:WBA) has experienced an increase in enthusiasm from smart money recently. Walgreens Boots Alliance Inc (NASDAQ:WBA) was in 36 hedge funds’ portfolios at the end of December. The all time high for this statistic is 91. There were 33 hedge funds in our database with WBA holdings at the end of September. Our calculations also showed that WBA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
John Rogers of Ariel Investments
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. Now we’re going to review the recent hedge fund action surrounding Walgreens Boots Alliance Inc (NASDAQ:WBA).
Do Hedge Funds Think WBA Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WBA over the last 22 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Camber Capital Management was the largest shareholder of Walgreens Boots Alliance Inc (NASDAQ:WBA), with a stake worth $119.6 million reported as of the end of December. Trailing Camber Capital Management was Millennium Management, which amassed a stake valued at $94 million. Citadel Investment Group, Ariel Investments, and Antipodes Partners 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 Tri Locum Partners allocated the biggest weight to Walgreens Boots Alliance Inc (NASDAQ:WBA), around 6.39% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, earmarking 4.2 percent of its 13F equity portfolio to WBA.
Consequently, some big names were leading the bulls’ herd. Camber Capital Management, managed by Stephen DuBois, created the largest position in Walgreens Boots Alliance Inc (NASDAQ:WBA). Camber Capital Management had $119.6 million invested in the company at the end of the quarter. Prashanth Jayaram’s Tri Locum Partners also made a $17.6 million investment in the stock during the quarter. The other funds with brand new WBA positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Nicholas Bagnall’s Te Ahumairangi Investment Management, and Parvinder Thiara’s Athanor Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Walgreens Boots Alliance Inc (NASDAQ:WBA) but similarly valued. We will take a look at Palo Alto Networks Inc (NYSE:PANW), IQVIA Holdings, Inc. (NYSE:IQV), T. Rowe Price Group, Inc. (NASDAQ:TROW), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), PPG Industries, Inc. (NYSE:PPG), RingCentral Inc (NYSE:RNG), and Verisk Analytics, Inc. (NASDAQ:VRSK). This group of stocks’ market values are closest to WBA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PANW | 61 | 4935498 | 2 |
| IQV | 69 | 3764572 | 5 |
| TROW | 35 | 360876 | 1 |
| ALXN | 77 | 6025546 | 19 |
| PPG | 34 | 295422 | -2 |
| RNG | 63 | 4401111 | 4 |
| VRSK | 32 | 1438418 | -8 |
| Average | 53 | 3031635 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 53 hedge funds with bullish positions and the average amount invested in these stocks was $3032 million. That figure was $609 million in WBA’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Verisk Analytics, Inc. (NASDAQ:VRSK) is the least popular one with only 32 bullish hedge fund positions. Walgreens Boots Alliance Inc (NASDAQ:WBA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for WBA is 24.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. A small number of hedge funds were also right about betting on WBA as the stock returned 38.6% since the end of the fourth quarter (through 4/1) and outperformed the market by an even larger margin.
Follow Walgreens Boots Alliance Inc. (NASDAQ:WBA)
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Disclosure: None. This article was originally published at Insider Monkey.
