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Is AstraZeneca plc (ADR) (AZN) A Good Stock To Buy?

Between June 25 and October 30th the Russell 2000 ETF (IWM) has lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worry over the possible ramifications of rising interest rates. The hedge funds and institutional investors that we track typically invest more in smaller cap stocks than the normal investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of AstraZeneca plc (ADR) (NYSE:AZN) and see how the stock is affected by the recent hedge fund activity.

AstraZeneca plc (ADR) (NYSE:AZN) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. At the end of this article, we will also compare AstraZeneca plc (ADR) (NYSE:AZN) to other stocks including Royal Bank of Canada (USA) (NYSE:RY), United Technologies Corporation (NYSE:UTX), and SAP SE (ADR) (NYSE:SAP) to get a better sense of its popularity.

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To most stock holders, hedge funds are seen as unimportant, outdated financial vehicles of the past. While there are over 8000 funds with their doors open at the moment, our researchers hone in on the moguls of this club, about 700 funds. These investment experts oversee bulk of the smart money’s total asset base, and by tailing their unrivaled investments, Insider Monkey has discovered numerous investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points a year for a decade in their back tests.

With all of this in mind, let’s view the latest action surrounding AstraZeneca plc (ADR) (NYSE:AZN).

What have hedge funds been doing with AstraZeneca plc (ADR) (NYSE:AZN)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 10% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund holdings data compiled by Insider Monkey, Renaissance Technologies had the biggest position in AstraZeneca plc (ADR) (NYSE:AZN), worth close to $173.5 million, accounting for 0.4% of its total 13F portfolio. The second largest stake is held by Camber Capital Management, led by Stephen DuBois, holding a $79.6 million position; 6.8% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish, encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Israel Englander’s Millennium Management and Matthew Hulsizer’s PEAK6 Capital Management.

Since AstraZeneca plc (ADR) (NYSE:AZN) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedgies that decided to sell off their entire stakes heading into Q4. Intriguingly, Peter Muller’s PDT Partners dumped the biggest position of the 700 funds tracked by Insider Monkey, comprising close to $11 million in stock. Ned Sadaka’s fund, Para Advisors, also dropped its stock, about $4.5 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AstraZeneca plc (ADR) (NYSE:AZN) but similarly valued. We will take a look at Royal Bank of Canada (USA) (NYSE:RY), United Technologies Corporation (NYSE:UTX), SAP SE (ADR) (NYSE:SAP), and Ambev SA (ADR) (NYSE:ABEV). This group of stocks’ market values are similar to AstraZeneca plc (ADR) (NYSE:AZN)’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RY 17 504408 -4
UTX 48 2745803 -9
SAP 11 428929 2
ABEV 18 607674 2

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $1.07 billion, higher than the $402 million in AstraZeneca plc (ADR) (NYSE:AZN)’s case. United Technologies Corporation (NYSE:UTX) is the most popular stock in this table. On the other hand, SAP SE (ADR) (NYSE:SAP) is the least popular one with only 11 bullish hedge fund positions. AstraZeneca plc (ADR) (NYSE:AZN)’s popularity among smart money is below average, which represents a slightly negative signal. A further analysis is required before considering a long position, but United Technologies Corporation (NYSE:UTX) might be an even better investment, based on the hedge fund sentiment.

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