Hedge Funds Are Nibbling On AmerisourceBergen Corporation (ABC)

In this article we will check out the progression of hedge fund sentiment towards AmerisourceBergen Corporation (NYSE:ABC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

AmerisourceBergen Corporation (NYSE:ABC) has experienced an increase in support from the world’s most elite money managers in recent months. ABC was in 41 hedge funds’ portfolios at the end of the first quarter of 2020. There were 40 hedge funds in our database with ABC positions at the end of the previous quarter. Our calculations also showed that ABC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 44 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.


Larry Robbins of Glenview Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the new hedge fund action regarding AmerisourceBergen Corporation (NYSE:ABC).

Hedge fund activity in AmerisourceBergen Corporation (NYSE:ABC)

At Q1’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ABC over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in AmerisourceBergen Corporation (NYSE:ABC), which was worth $125.8 million at the end of the third quarter. On the second spot was Holocene Advisors which amassed $106.7 million worth of shares. Baupost Group, Glenview Capital, and Antipodes Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sivik Global Healthcare allocated the biggest weight to AmerisourceBergen Corporation (NYSE:ABC), around 4.96% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, setting aside 4.47 percent of its 13F equity portfolio to ABC.

Now, specific money managers have been driving this bullishness. Antipodes Partners, managed by Jacob Mitchell, assembled the biggest position in AmerisourceBergen Corporation (NYSE:ABC). Antipodes Partners had $39.8 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also made a $30 million investment in the stock during the quarter. The other funds with brand new ABC positions are Sander Gerber’s Hudson Bay Capital Management, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Krishen Sud’s Sivik Global Healthcare.

Let’s also examine hedge fund activity in other stocks similar to AmerisourceBergen Corporation (NYSE:ABC). These stocks are Chipotle Mexican Grill, Inc. (NYSE:CMG), Cintas Corporation (NASDAQ:CTAS), China Unicom (Hong Kong) Limited (NYSE:CHU), and Ameren Corporation (NYSE:AEE). All of these stocks’ market caps resemble ABC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMG 48 2674255 0
CTAS 42 458144 -3
CHU 6 47948 -5
AEE 21 723627 -10
Average 29.25 975994 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $976 million. That figure was $635 million in ABC’s case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. AmerisourceBergen Corporation (NYSE:ABC) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately ABC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ABC were disappointed as the stock returned 8.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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