Pfizer Inc. (PFE), Gilead Sciences, Inc. (GILD), Merck & Co., Inc. (MRK) Among Hedge Funds’ Favorite Pharma Stocks

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We maintain a database of quarterly 13F filings from hundreds of hedge funds and other notable investors. Our research has shown that this information can be useful in developing investment strategies: on average, the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year and a sample portfolio based on this technique outperformed the S&P 500 by 33 percentage points in the last 11 months. Learn more about our small cap strategy. We also like to go through our database and identify trends in how the filers we track are playing the market, including which stocks they tend to favor in certain industries or sectors. Read on for the ten stocks which the largest number of filers in our database reported owning as of the end of June.

75 hedge funds and other investors in our database owned shares of Pfizer Inc. (NYSE:PFE) at the end of Q2. Pfizer Inc. (NYSE:PFE) had been billionaire Ken Fisher (manager of Fisher Asset Management)’s stock pick for 2013; the asset management firm had owned about 31 million shares. Find Fisher’s favorite stocks. The company carries a forward earnings multiple of only 12, and has recently been selling assets to focus on its core business.

Ken Fisher - FISHER ASSET MANAGEMENT

A number of funds initiated positions in Gilead Sciences, Inc. (NASDAQ:GILD) last quarter, placing it right behind Pfizer Inc. (NYSE:PFE) on this list. At its current valuation the biopharmaceutical company is pricy in terms of its trailing results, but the stock has more than doubled in the last year as markets have high expectations for its products in development. Billionaire Steve Cohen’s SAC Capital Advisors was buying Gilead last quarter (see Cohen’s stock picks).

Pharmacy benefit management services company Express Scripts Holding Company (NASDAQ:ESRX) rose a bit in popularity, allowing the company to snag the #3 slot. As with Pfizer Inc. (NYSE:PFE), Express Scripts is actually trading at close to value levels; for example, the forward P/E is only 13. Billionaire Leon Cooperman’s hedge fund Omega Advisors had 2.7 million shares of the stock in its portfolio (check out more stocks Omega owns).

On net, 9 hedge funds added Merck & Co., Inc. (NYSE:MRK) to their portfolio last quarter, and healthcare-focused fund Orbimed Advisors increased its stake in the drug company by 86%. Research more stocks Orbimed has been buying. At current prices and dividend levels, Merck’s dividend yield is 3.6% putting it in line to slightly above the yields at other large pharmaceutical companies (Pfizer’s dividend yield is 3.4%).

Thermo Fisher Scientific Inc. (NYSE:TMO) was a hot name among hedge funds as managers liked the news that the company will acquire Life Technologies. Revenue and earnings have already been up for the business as well, and the stock trades at a forward P/E of 16. Billionaire John Paulson’s Paulson & Co. had been one of the several hedge funds buying into Thermo Fisher (find more of Paulson’s stock picks).
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