Where Do Hedge Funds Stand On Merck & Co (MRK)?

Is Merck & Co., Inc. (NYSE:MRK) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Hedge fund interest in Merck & Co., Inc. (NYSE:MRK) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MRK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Broadcom Inc (NASDAQ:AVGO), Novo Nordisk A/S (NYSE:NVO), and Danaher Corporation (NYSE:DHR) to gather more data points.

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Ken Fisher of Fisher Asset Management

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

At the end of June, a total of 79 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MRK over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Merck & Co., Inc. (NYSE:MRK) was held by Fisher Asset Management, which reported holding $802.3 million worth of stock at the end of June. It was followed by Berkshire Hathaway with a $712.2 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and AQR Capital Management. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Merck & Co., Inc. (NYSE:MRK), around 7.98% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, setting aside 6.2 percent of its 13F equity portfolio to MRK.

Seeing as Merck & Co., Inc. (NYSE:MRK) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few fund managers that elected to cut their entire stakes heading into Q3. At the top of the heap, Gordon W Malin’s Mountain Road Advisors dumped the biggest stake of the 750 funds watched by Insider Monkey, valued at about $25.4 million in stock, and Mika Toikka’s AlphaCrest Capital Management was right behind this move, as the fund dumped about $13.4 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Merck & Co., Inc. (NYSE:MRK). We will take a look at Broadcom Inc (NASDAQ:AVGO), Novo Nordisk A/S (NYSE:NVO), Danaher Corporation (NYSE:DHR), Wells Fargo & Company (NYSE:WFC), Accenture Plc (NYSE:ACN), BHP Group (NYSE:BHP), and Shopify Inc (NYSE:SHOP). All of these stocks’ market caps match MRK’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.3 hedge funds with bullish positions and the average amount invested in these stocks was $5425 million. That figure was $5296 million in MRK’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Merck & Co., Inc. (NYSE:MRK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MRK is 73.3. 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. This is a slightly positive signal but 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 24.1% in 2021 through September 20th and beat the market again by 6.9 percentage points. Unfortunately MRK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MRK were disappointed as the stock returned -6.7% since the end of June (through 9/20) 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 many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.