Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged during the first quarter. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 40% and 25% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the first 5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
AmerisourceBergen Corporation (NYSE:ABC) shareholders have witnessed a decrease in hedge fund sentiment in recent months. ABC was in 28 hedge funds’ portfolios at the end of March. There were 34 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.
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’ 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a glance at the key hedge fund action surrounding AmerisourceBergen Corporation (NYSE:ABC).
What have hedge funds been doing with AmerisourceBergen Corporation (NYSE:ABC)?
At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ABC over the last 15 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Seth Klarman’s Baupost Group has the biggest position in AmerisourceBergen Corporation (NYSE:ABC), worth close to $191.2 million, comprising 1.6% of its total 13F portfolio. On Baupost Group’s heels is Larry Robbins of Glenview Capital, with a $173.4 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Ray Dalio’s Bridgewater Associates.
Since AmerisourceBergen Corporation (NYSE:ABC) has faced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that elected to cut their positions entirely in the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of the 700 funds monitored by Insider Monkey, worth about $18.6 million in stock. Michael Castor’s fund, Sio Capital, also cut its stock, about $10 million worth. These moves are important to note, as total hedge fund interest dropped by 6 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as AmerisourceBergen Corporation (NYSE:ABC) but similarly valued. We will take a look at Deutsche Bank Aktiengesellschaft (NYSE:DB), W.W. Grainger, Inc. (NYSE:GWW), Korea Electric Power Corporation (NYSE:KEP), and Diamondback Energy Inc (NASDAQ:FANG). This group of stocks’ market caps match ABC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DB | 13 | 1074334 | -1 |
| GWW | 29 | 349124 | 6 |
| KEP | 10 | 37936 | 1 |
| FANG | 47 | 1854682 | 3 |
| Average | 24.75 | 829019 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $829 million. That figure was $678 million in ABC’s case. Diamondback Energy Inc (NASDAQ:FANG) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (NYSE:KEP) is the least popular one with only 10 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on ABC, though not to the same extent, as the stock returned -1% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
