Were Hedge Funds Right About Pfizer Inc. (PFE)?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Pfizer Inc. (NYSE:PFE).

Is Pfizer Inc. (NYSE:PFE) the right pick for your portfolio? The smart money was becoming hopeful. The number of bullish hedge fund positions inched up by 2 lately. Pfizer Inc. (NYSE:PFE) was in 65 hedge funds’ portfolios at the end of the first quarter of 2021. 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).

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 115 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.

David Siegel of Two Sigma Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, 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 view the new hedge fund action surrounding Pfizer Inc. (NYSE:PFE).

Do Hedge Funds Think PFE Is A Good Stock To Buy Now?

At Q1’s end, a total of 65 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 67 hedge funds with a bullish position in PFE a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Diamond Hill Capital, managed by Matthew Stadelman, holds the biggest position in Pfizer Inc. (NYSE:PFE). Diamond Hill Capital has a $407.3 million position in the stock, comprising 1.6% of its 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $387.2 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group. 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, dishing out 5.27 percent of its 13F equity portfolio to PFE.

Now, key hedge funds have jumped into Pfizer Inc. (NYSE:PFE) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest 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 initiated a $43.5 million position 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 go over 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 valuations match PFE’s market valuation.

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 25.8% in 2021 through August 6th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on PFE as the stock returned 26.8% since the end of Q1 (through 8/6) 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.