Is WBA A Good Stock To Buy According To Hedge Funds?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Walgreens Boots Alliance Inc (NASDAQ:WBA)? The smart money sentiment can provide an answer to this question.

Is WBA a good stock to buy? The best stock pickers were reducing their bets on the stock. The number of long hedge fund bets retreated by 12 in recent months. Walgreens Boots Alliance Inc (NASDAQ:WBA) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 91. Our calculations also showed that WBA 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.

To most investors, hedge funds are perceived as worthless, old financial tools of the past. While there are more than 8000 funds in operation at the moment, Our experts choose to focus on the leaders of this group, approximately 850 funds. These investment experts preside over the lion’s share of the hedge fund industry’s total asset base, and by tailing their highest performing equity investments, Insider Monkey has determined a few investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .


Lee Ainslie of Maverick 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 under the radar cannabis 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 let’s take a look at the recent hedge fund action encompassing Walgreens Boots Alliance Inc (NASDAQ:WBA).

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

At the end of September, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WBA over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is WBA A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Walgreens Boots Alliance Inc (NASDAQ:WBA), which was worth $83.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $53.3 million worth of shares. Balyasny Asset Management, Ariel Investments, and Balyasny Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sio Capital allocated the biggest weight to Walgreens Boots Alliance Inc (NASDAQ:WBA), around 2.13% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, designating 0.65 percent of its 13F equity portfolio to WBA.

Because Walgreens Boots Alliance Inc (NASDAQ:WBA) has faced falling interest from the smart money, it’s easy to see that there exists a select few money managers that decided to sell off their positions entirely last quarter. Intriguingly, Michael Rockefeller and KarláKroeker’s Woodline Partners sold off the largest position of the 750 funds monitored by Insider Monkey, valued at an estimated $41.7 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $29.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 12 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Walgreens Boots Alliance Inc (NASDAQ:WBA). These stocks are Agilent Technologies Inc. (NYSE:A), Datadog, Inc. (NASDAQ:DDOG), Banco Santander, S.A. (NYSE:SAN), WEC Energy Group, Inc. (NYSE:WEC), The Bank of New York Mellon Corporation (NYSE:BK), Johnson Controls International plc (NYSE:JCI), and Banco Bradesco SA (NYSE:BBD). This group of stocks’ market values resemble WBA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
A 39 3221001 1
DDOG 42 2604703 -15
SAN 14 232246 -2
WEC 22 237741 -8
BK 48 3728518 0
JCI 24 892177 -4
BBD 20 213273 2
Average 29.9 1589951 -3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $1590 million. That figure was $286 million in WBA’s case. The Bank of New York Mellon Corporation (NYSE:BK) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 14 bullish hedge fund positions. Walgreens Boots Alliance Inc (NASDAQ:WBA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WBA is 31.8. 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. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on WBA as the stock returned 14.6% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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