How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding AstraZeneca plc (NASDAQ:AZN).
AstraZeneca plc (NASDAQ:AZN) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. AstraZeneca plc (NASDAQ:AZN) was in 37 hedge funds’ portfolios at the end of June. The all time high for this statistic is 41. There were 34 hedge funds in our database with AZN positions at the end of the first quarter. Our calculations also showed that AZN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
To the average investor there are several formulas market participants put to use to evaluate their holdings. A couple of the less known formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outclass the market by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Philip Hempleman of Ardsley Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 take a peek at the key hedge fund action surrounding AstraZeneca plc (NASDAQ:AZN).
Do Hedge Funds Think AZN Is A Good Stock To Buy Now?
At second quarter’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in AZN a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of AstraZeneca plc (NASDAQ:AZN), with a stake worth $1127.9 million reported as of the end of June. Trailing Fisher Asset Management was GQG Partners, which amassed a stake valued at $995.9 million. Camber Capital Management, Point72 Asset 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 AstraZeneca plc (NASDAQ:AZN), around 5.97% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, designating 4.65 percent of its 13F equity portfolio to AZN.
As industrywide interest jumped, some big names were leading the bulls’ herd. Camber Capital Management, managed by Stephen DuBois, assembled the biggest call position in AstraZeneca plc (NASDAQ:AZN). Camber Capital Management had $119.8 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $36.7 million investment in the stock during the quarter. The other funds with brand new AZN positions are D. E. Shaw’s D E Shaw, Philip Hempleman’s Ardsley Partners, and Ray Dalio’s Bridgewater Associates.
Let’s also examine hedge fund activity in other stocks similar to AstraZeneca plc (NASDAQ:AZN). We will take a look at Philip Morris International Inc. (NYSE:PM), Royal Dutch Shell plc (NYSE:RDS), Unilever PLC (NYSE:UL), Honeywell International Inc. (NYSE:HON), Linde plc (NYSE:LIN), Bristol Myers Squibb Company (NYSE:BMY), and Charter Communications, Inc. (NASDAQ:CHTR). This group of stocks’ market valuations are closest to AZN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PM | 46 | 5973614 | -2 |
| RDS | 38 | 2444791 | 2 |
| UL | 19 | 844216 | -1 |
| HON | 57 | 1834599 | 1 |
| LIN | 55 | 5920316 | 12 |
| BMY | 73 | 5202516 | -8 |
| CHTR | 75 | 19486659 | 1 |
| Average | 51.9 | 5958102 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.9 hedge funds with bullish positions and the average amount invested in these stocks was $5958 million. That figure was $2772 million in AZN’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Unilever PLC (NYSE:UL) is the least popular one with only 19 bullish hedge fund positions. AstraZeneca plc (NASDAQ:AZN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AZN is 51.1. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 through November 5th and surpassed the market again by 3.1 percentage points. Unfortunately AZN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AZN investors were disappointed as the stock returned 6.2% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Astrazeneca Plc (NYSE:AZN)
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Disclosure: None. This article was originally published at Insider Monkey.
