Was The Smart Money Right About Pfizer Inc. (PFE)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 873 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th. In this article we look at what those investors think of Pfizer Inc. (NYSE:PFE).

Pfizer Inc. (NYSE:PFE) shareholders have witnessed an increase in hedge fund interest in recent months. Pfizer Inc. (NYSE:PFE) was in 67 hedge funds’ portfolios at the end of June. 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 Q2 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. We check out articles like Warren Buffett’s 3 money saving tips that provide inflation and volatility hedges. 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 go over 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 June, a total of 67 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 66 hedge funds with a bullish position in PFE a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Among these funds, Diamond Hill Capital held the most valuable stake in Pfizer Inc. (NYSE:PFE), which was worth $457.4 million at the end of the second quarter. On the second spot was Two Sigma Advisors which amassed $422.4 million worth of shares. Citadel Investment Group, D E Shaw, and AQR Capital Management 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 7.8% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, setting aside 5.54 percent of its 13F equity portfolio to PFE.

Now, specific money managers were breaking ground themselves. Renaissance Technologies, assembled the biggest position in Pfizer Inc. (NYSE:PFE). Renaissance Technologies had $92.6 million invested in the company at the end of the quarter. Stephen DuBois’s Camber Capital Management also initiated a $78.3 million position during the quarter. The other funds with new positions in the stock are Henrik Rhenman’s Rhenman & Partners Asset Management, Andrew Weiss’s Weiss Asset Management, and Prashanth Jayaram’s Tri Locum Partners.

Let’s now review hedge fund activity in other stocks similar to Pfizer Inc. (NYSE:PFE). We will take a look at Oracle Corporation (NASDAQ:ORCL), Abbott Laboratories (NYSE:ABT), AT&T Inc. (NYSE:T), Novartis AG (NYSE:NVS), PepsiCo, Inc. (NYSE:PEP), Chevron Corporation (NYSE:CVX), and AbbVie Inc (NYSE:ABBV). This group of stocks’ market valuations are similar to PFE’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 57.7 hedge funds with bullish positions and the average amount invested in these stocks was $3824 million. That figure was $2357 million in PFE’s case. AbbVie Inc (NYSE:ABBV) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 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 61.4. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. Hedge funds were also right about betting on PFE as the stock returned 12.7% since the end of Q2 (through 10/29) 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.

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