Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Eli Lilly and Company (NYSE:LLY) based on that data.
Is LLY a good stock to buy now? Eli Lilly and Company (NYSE:LLY) has experienced an increase in enthusiasm from smart money lately. Eli Lilly and Company (NYSE:LLY) was in 60 hedge funds’ portfolios at the end of September. The all time high for this statistics is 57. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that LLY 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. Now we’re going to analyze the new hedge fund action surrounding Eli Lilly and Company (NYSE:LLY).
Hedge fund activity in Eli Lilly and Company (NYSE:LLY)
At Q3’s end, a total of 60 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. By comparison, 44 hedge funds held shares or bullish call options in LLY a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Eli Lilly and Company (NYSE:LLY) was held by Fisher Asset Management, which reported holding $692.5 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $309 million position. Other investors bullish on the company included AQR Capital Management, Point72 Asset Management, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Sirios Capital Management allocated the biggest weight to Eli Lilly and Company (NYSE:LLY), around 3.66% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, earmarking 3.5 percent of its 13F equity portfolio to LLY.
As aggregate interest increased, specific money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in Eli Lilly and Company (NYSE:LLY). Point72 Asset Management had $194.9 million invested in the company at the end of the quarter. Rajiv Jain’s GQG Partners also initiated a $87 million position during the quarter. The other funds with new positions in the stock are John Brennan’s Sirios Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Anand Parekh’s Alyeska Investment Group.
Let’s also examine hedge fund activity in other stocks similar to Eli Lilly and Company (NYSE:LLY). We will take a look at Medtronic plc (NYSE:MDT), NextEra Energy, Inc. (NYSE:NEE), Bristol Myers Squibb Company (NYSE:BMY), Chevron Corporation (NYSE:CVX), Zoom Video Communications, Inc. (NASDAQ:ZM), Union Pacific Corporation (NYSE:UNP), and QUALCOMM, Incorporated (NASDAQ:QCOM). This group of stocks’ market values match LLY’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 72.9 hedge funds with bullish positions and the average amount invested in these stocks was $4393 million. That figure was $2530 million in LLY’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Chevron Corporation (NYSE:CVX) is the least popular one with only 43 bullish hedge fund positions. Eli Lilly and Company (NYSE:LLY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LLY is 50.5. 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 negative signal and 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 31.6% in 2020 through December 2nd and surpassed the market again by 16 percentage points. Unfortunately LLY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); LLY investors were disappointed as the stock returned -1.4% since the end of September (through 12/2) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.