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Is AmerisourceBergen Corporation (ABC) Going to Burn These Hedge Funds?

Is AmerisourceBergen Corporation (NYSE:ABC) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

AmerisourceBergen Corporation (NYSE:ABC) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that ABC isn’t among the 30 most popular stocks among hedge funds.

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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

BAUPOST GROUP Seth Klarman

We’re going to review the latest hedge fund action surrounding AmerisourceBergen Corporation (NYSE:ABC).

How have hedgies been trading AmerisourceBergen Corporation (NYSE:ABC)?

At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the second quarter of 2018. By comparison, 32 hedge funds held shares or bullish call options in ABC heading into this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

ABC_dec2018

The largest stake in AmerisourceBergen Corporation (NYSE:ABC) was held by Baupost Group, which reported holding $253.7 million worth of stock at the end of September. It was followed by Glenview Capital with a $85.2 million position. Other investors bullish on the company included Kensico Capital, HBK Investments, and Marshall Wace LLP.

Judging by the fact that AmerisourceBergen Corporation (NYSE:ABC) has faced bearish sentiment from the smart money, it’s easy to see that there lies a certain “tier” of funds that slashed their positions entirely heading into Q3. Interestingly, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $18.8 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $18.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds heading into Q3.

Let’s also examine 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 Arista Networks Inc (NYSE:ANET), Harris Corporation (NYSE:HRS), Marathon Oil Corporation (NYSE:MRO), and Verisk Analytics, Inc. (NASDAQ:VRSK). This group of stocks’ market values resemble ABC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ANET 22 574815 0
HRS 27 530950 2
MRO 39 1584494 1
VRSK 23 902227 -5
Average 27.75 898122 -0.5

View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $898.12 billion. That figure was $609 million in ABC’s case. Marathon Oil Corporation (NYSE:MRO) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 22 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MRO might be a better candidate to consider a long position.

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

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