Is AbbVie (ABBV) A Good Stock To Buy?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards AbbVie Inc (NYSE:ABBV) to find out whether there were any major changes in hedge funds’ views.

Is AbbVie Inc (NYSE:ABBV) the right pick for your portfolio? Prominent investors were in an optimistic mood. The number of bullish hedge fund bets went up by 10 in recent months. AbbVie Inc (NYSE:ABBV) was in 82 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 89. Our calculations also showed that ABBV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 72 hedge funds in our database with ABBV positions at the end of the first quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the recent hedge fund action regarding AbbVie Inc (NYSE:ABBV).

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

At second quarter’s end, a total of 82 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ABBV over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the largest position in AbbVie Inc (NYSE:ABBV), worth close to $2.3123 billion, amounting to 0.8% of its total 13F portfolio. Coming in second is William B. Gray of Orbis Investment Management, with a $747.1 million position; the fund has 4.7% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise John Overdeck and David Siegel’s Two Sigma Advisors, Ric Dillon’s Diamond Hill Capital and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position HealthInvest Partners AB allocated the biggest weight to AbbVie Inc (NYSE:ABBV), around 9.07% of its 13F portfolio. Iron Triangle Partners is also relatively very bullish on the stock, dishing out 6.18 percent of its 13F equity portfolio to ABBV.

Consequently, key money managers were leading the bulls’ herd. Masters Capital Management, managed by Mike Masters, assembled the largest call position in AbbVie Inc (NYSE:ABBV). Masters Capital Management had $112.6 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also made a $16.9 million investment in the stock during the quarter. The following funds were also among the new ABBV investors: Chris Rokos’s Rokos Capital Management, Andrew Weiss’s Weiss Asset Management, and Efrem Kamen’s Pura Vida Investments.

Let’s also examine hedge fund activity in other stocks similar to AbbVie Inc (NYSE:ABBV). These stocks are Thermo Fisher Scientific Inc. (NYSE:TMO), Merck & Co., Inc. (NYSE:MRK), Broadcom Inc (NASDAQ:AVGO), Novo Nordisk A/S (NYSE:NVO), Danaher Corporation (NYSE:DHR), Wells Fargo & Company (NYSE:WFC), and Accenture Plc (NYSE:ACN). This group of stocks’ market valuations match ABBV’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 65.3 hedge funds with bullish positions and the average amount invested in these stocks was $5133 million. That figure was $5351 million in ABBV’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 20 bullish hedge fund positions. AbbVie Inc (NYSE:ABBV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABBV is 79.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.1% in 2021 through September 20th and beat the market again by 6.9 percentage points. Unfortunately ABBV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ABBV were disappointed as the stock returned -4.5% since the end of June (through 9/20) 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 many of these stocks already outperformed the market since 2019.

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