2. Pfizer Inc. (NYSE:PFE)
Value of AQR Capital Management‘s 13F Position: $554 million
Number of Hedge Fund Shareholders: 80
Cliff Asness also continued to build up his fund’s position in Pfizer Inc. (NYSE:PFE) during Q1, growing it to 10.7 million shares by the end of March, 56% more than his fund held at the end of 2021. The biopharmaceutical company now ranks among AQR Capital’s top ten long positions. Hedge fund ownership of Pfizer is up by 45% since bottoming out in the third quarter of 2019.
With coronavirus cases trending upwards again, the U.S government recently ordered 105 million doses of Pfizer Inc. (NYSE:PFE) and BioNTech’s co-developed vaccine, which will pay the two companies $3.2 billion upon delivery. The deal also includes an option to buy another 195 million doses. Pfizer has used the windfall from its vaccines to aggressively grow its company with an eye towards a post-pandemic future, spending nearly $19 billion on three separate acquisitions since last December which have helped expand its pipeline and product portfolio.
In its Q4 2021 investor letter, ClearBridge Investments discussed its Pfizer Inc. (NYSE:PFE) holding and how the rapidly evolving Covid-19 pandemic affected its various investment decisions. Here is what the fund had to say on the topic:
“While the level of general turnover abated as we progressed through 2021, it remained high in one area: post-COVID-19 recovery plays. The concept behind this investment thesis was, and still is, straightforward: with the advent of effective vaccines, the path from pandemic to endemic is just a matter of time. As this transition occurs, the estimated excess savings of over $2 trillion built up on U.S. consumer balance sheets will unlock dramatic pent-up demand for experiences, especially global travel. This investment case seemed especially compelling when the Pfizer vaccine positively surprised markets in November 2020. As a result, we made post-COVID-19 stocks (which were trading well below our estimate of recovery value) a sizable theme within the portfolio. We understood this to be a more aggressive tilt in positioning because it required a major improvement in demand to catalyze fundamentals and drive price toward higher business values. While we accepted that recovery would not be smooth and that it would take time to deploy vaccines both domestically and globally, we decided that recovery was the logical path of least resistance and we were being well compensated for these risks.
What we did not account for, however, was vaccine hesitancy and the risk of further infection waves. As a result, the first variant wave, Delta, was a negative surprise to both the market and our team. When the risk surfaced, we immediately updated our probability-driven models and debated how we should react. The resulting conclusion was that the recovery would be delayed and that we should reduce our exposure quickly, subsequently targeting the most aggressive recovery stocks such as cruise lines. We again acted swiftly and decisively to the positive surprise that Pfizer Inc. (NYSE:PFE) had delivered a high-efficacy antiviral COVID-19 pill. This pill should greatly reduce COVID-19 severity risks globally, increasing the probability of a global travel recovery in 2022. While this is still true, the emergence of the highly mutated Omicron variant set off another infection wave which spurred us to again act quickly and further reduce our risk exposure. This back-and-forth may sound exhausting, but it highlights our compulsion to act if we determine a surprise has a large enough impact on the probabilities that power our valuation-driven investment cases.”
