Hedge Funds Are Avoiding Teva Pharmaceutical Industries (TEVA)

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Teva Pharmaceutical Industries Limited (NYSE:TEVA) changed recently.

Teva Pharmaceutical Industries Limited (NYSE:TEVA) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that TEVA 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 Booz Allen Hamilton Holding Corporation (NYSE:BAH), StoneCo Ltd. (NASDAQ:STNE), and Builders FirstSource, Inc. (NYSE:BLDR) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to take a gander at the recent hedge fund action encompassing Teva Pharmaceutical Industries Limited (NYSE:TEVA).

Kamran Moghtaderi of Eversept Partners

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

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2021. On the other hand, there were a total of 33 hedge funds with a bullish position in TEVA a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in Teva Pharmaceutical Industries Limited (NYSE:TEVA) was held by Berkshire Hathaway, which reported holding $416.8 million worth of stock at the end of September. It was followed by Abrams Capital Management with a $234.2 million position. Other investors bullish on the company included Miller Value Partners, Camber Capital Management, and Eversept Partners. In terms of the portfolio weights assigned to each position Abrams Capital Management allocated the biggest weight to Teva Pharmaceutical Industries Limited (NYSE:TEVA), around 5.11% of its 13F portfolio. Eversept Partners is also relatively very bullish on the stock, earmarking 2.59 percent of its 13F equity portfolio to TEVA.

Seeing as Teva Pharmaceutical Industries Limited (NYSE:TEVA) has witnessed a decline in interest from hedge fund managers, logic holds that there were a few money managers that elected to cut their full holdings last quarter. It’s worth mentioning that Prashanth Jayaram’s Tri Locum Partners cut the biggest stake of all the hedgies tracked by Insider Monkey, valued at an estimated $4.4 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dumped about $0.5 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Teva Pharmaceutical Industries Limited (NYSE:TEVA) but similarly valued. We will take a look at Booz Allen Hamilton Holding Corporation (NYSE:BAH), StoneCo Ltd. (NASDAQ:STNE), Builders FirstSource, Inc. (NYSE:BLDR), American Financial Group, Inc. (NYSE:AFG), Henry Schein, Inc. (NASDAQ:HSIC), Dicks Sporting Goods Inc (NYSE:DKS), and GDS Holdings Limited (NASDAQ:GDS). This group of stocks’ market values match TEVA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BAH 23 198716 -6
STNE 37 2215793 -7
BLDR 53 2213103 -7
AFG 23 239662 4
HSIC 31 1483481 -8
DKS 36 1615509 0
GDS 24 1018195 -14
Average 32.4 1283494 -5.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $1283 million. That figure was $951 million in TEVA’s case. Builders FirstSource, Inc. (NYSE:BLDR) is the most popular stock in this table. On the other hand Booz Allen Hamilton Holding Corporation (NYSE:BAH) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Teva Pharmaceutical Industries Limited (NYSE:TEVA) is even less popular than BAH. Our overall hedge fund sentiment score for TEVA is 13.1. 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. Hedge funds dodged a bullet by taking a bearish stance towards TEVA. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 but managed to beat the market again by 3.6 percentage points. Unfortunately TEVA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); TEVA investors were disappointed as the stock returned -17.8% since the end of the third quarter (through 12/31) 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 most of these stocks already outperformed the market since 2019.

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