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How Did Pfizer Inc. (PFE) Compare Against Hedge Fund Darlings in 2019?

Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. What do these smart investors think about Pfizer Inc. (NYSE:PFE)?

Pfizer Inc. (NYSE:PFE) shareholders have witnessed an increase in hedge fund interest in recent months. PFE was in 55 hedge funds’ portfolios at the end of September. There were 52 hedge funds in our database with PFE positions at the end of the previous quarter. Our calculations also showed that PFE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a look at the key hedge fund action surrounding Pfizer Inc. (NYSE:PFE).

Hedge fund activity in Pfizer Inc. (NYSE:PFE)

At the end of the third quarter, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 58 hedge funds with a bullish position in PFE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PFE A Good Stock To Buy?

More specifically, Fisher Asset Management was the largest shareholder of Pfizer Inc. (NYSE:PFE), with a stake worth $1627.3 million reported as of the end of September. Trailing Fisher Asset Management was AQR Capital Management, which amassed a stake valued at $466.1 million. Diamond Hill Capital, Two Sigma Advisors, and Adage Capital Management 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 Kahn Brothers allocated the biggest weight to Pfizer Inc. (NYSE:PFE), around 3.66% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, dishing out 3.31 percent of its 13F equity portfolio to PFE.

Consequently, key hedge funds have jumped into Pfizer Inc. (NYSE:PFE) headfirst. Marshall Wace, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Pfizer Inc. (NYSE:PFE). Marshall Wace had $45.2 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $12 million investment in the stock during the quarter. The other funds with brand new PFE positions are Michael Castor’s Sio Capital, Peter Muller’s PDT Partners, and Donald Sussman’s Paloma Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Pfizer Inc. (NYSE:PFE). We will take a look at PepsiCo, Inc. (NYSE:PEP), Toyota Motor Corporation (NYSE:TM), Anheuser-Busch InBev SA/NV (NYSE:BUD), and Oracle Corporation (NASDAQ:ORCL). This group of stocks’ market valuations are similar to PFE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PEP 57 3744859 2
TM 11 243035 3
BUD 19 1800212 1
ORCL 50 4360689 -11
Average 34.25 2537199 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $2537 million. That figure was $3768 million in PFE’s case. PepsiCo, Inc. (NYSE:PEP) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 11 bullish hedge fund positions. Pfizer Inc. (NYSE:PFE) 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately PFE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PFE were disappointed as the stock returned -6.6% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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