Is ABC A Good Stock To Buy Now?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider AmerisourceBergen Corporation (NYSE:ABC) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is AmerisourceBergen Corporation (NYSE:ABC) a bargain? The smart money was buying. The number of bullish hedge fund positions moved up by 5 lately. AmerisourceBergen Corporation (NYSE:ABC) was in 45 hedge funds’ portfolios at the end of September. The all time high for this statistic is 42. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ABC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GLENVIEW CAPITAL

Larry Robbins of Glenview Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to review the key hedge fund action encompassing AmerisourceBergen Corporation (NYSE:ABC).

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

At the end of the third quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. By comparison, 38 hedge funds held shares or bullish call options in ABC a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in AmerisourceBergen Corporation (NYSE:ABC). AQR Capital Management has a $148 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Glenview Capital, led by Larry Robbins, holding a $79.4 million position; 2.5% of its 13F portfolio is allocated to the company. Remaining peers that are bullish consist of Jacob Mitchell’s Antipodes Partners, D. E. Shaw’s D E Shaw and Andrew Sandler’s Sandler Capital Management. In terms of the portfolio weights assigned to each position Sandler Capital Management allocated the biggest weight to AmerisourceBergen Corporation (NYSE:ABC), around 3.48% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, earmarking 3.14 percent of its 13F equity portfolio to ABC.

As aggregate interest increased, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in AmerisourceBergen Corporation (NYSE:ABC). Arrowstreet Capital had $11 million invested in the company at the end of the quarter. Renaissance Technologies also made a $7.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Noam Gottesman’s GLG Partners, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as AmerisourceBergen Corporation (NYSE:ABC) but similarly valued. These stocks are Simon Property Group, Inc (NYSE:SPG), Entergy Corporation (NYSE:ETR), Immunomedics, Inc. (NASDAQ:IMMU), Incyte Corporation (NASDAQ:INCY), Ameren Corporation (NYSE:AEE), Delta Air Lines, Inc. (NYSE:DAL), and Occidental Petroleum Corporation (NYSE:OXY). All of these stocks’ market caps are similar to ABC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPG 25 313077 -2
ETR 27 786556 -5
IMMU 81 6943238 33
INCY 35 3821456 6
AEE 20 521323 1
DAL 43 753247 4
OXY 43 1173828 9
Average 39.1 2044675 6.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.1 hedge funds with bullish positions and the average amount invested in these stocks was $2045 million. That figure was $477 million in ABC’s case. Immunomedics, Inc. (NASDAQ:IMMU) is the most popular stock in this table. On the other hand Ameren Corporation (NYSE:AEE) is the least popular one with only 20 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. Our overall hedge fund sentiment score for ABC is 60.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately ABC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ABC were disappointed as the stock returned 4.1% since the end of September (through 12/8) 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.

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