At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
AstraZeneca plc (ADR) (NYSE:AZN) has seen an increase in enthusiasm from smart money in recent months. AZN was in 27 hedge funds’ portfolios at the end of September. There were 24 hedge funds in our database with AZN holdings at the end of the previous quarter. At the end of this article we will also compare AZN to other stocks including Lockheed Martin Corporation (NYSE:LMT), Union Pacific Corporation (NYSE:UNP), and Westpac Banking Corporation (ADR) (NYSE:WBK) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
With all of this in mind, let’s view the recent action encompassing AstraZeneca plc (ADR) (NYSE:AZN).
How have hedgies been trading AstraZeneca plc (ADR) (NYSE:AZN)?
Heading into the fourth quarter of 2016, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the second quarter of 2016. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, led by Jim Simons, holds the largest position in AstraZeneca plc (ADR) (NYSE:AZN). Renaissance Technologies has a $187.4 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Viking Global, led by Andreas Halvorsen, which holds a $137.2 million position; 0.6% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions encompass Ken Fisher’s Fisher Asset Management, Israel Englander’s Millennium Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Viking Global, managed by Andreas Halvorsen, assembled the largest position in AstraZeneca plc (ADR) (NYSE:AZN). Viking Global had $137.2 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $19.7 million position during the quarter. The following funds were also among the new AZN investors: James Dondero’s Highland Capital Management, Israel Englander’s Millennium Management, and Hal Mintz’s Sabby Capital.
Let’s now take a look at hedge fund activity in other stocks similar to AstraZeneca plc (ADR) (NYSE:AZN). We will take a look at Lockheed Martin Corporation (NYSE:LMT), Union Pacific Corporation (NYSE:UNP), Westpac Banking Corporation (ADR) (NYSE:WBK), and Mondelez International Inc (NASDAQ:MDLZ). This group of stocks’ market caps resemble AZN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $2298 million. That figure was $669 million in AZN’s case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand Westpac Banking Corporation (ADR) (NYSE:WBK) is the least popular one with only 5 bullish hedge fund positions. AstraZeneca plc (ADR) (NYSE:AZN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard UNP might be a better candidate to consider a long position.