Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is AstraZeneca plc (NYSE:AZN), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is AstraZeneca plc (NYSE:AZN) an exceptional investment right now? Investors who are in the know are taking an optimistic view. The number of long hedge fund positions went up by 4 recently. Our calculations also showed that AZN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). AZN was in 32 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 28 hedge funds in our database with AZN positions at the end of the previous quarter.
Video: Click the image to 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 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to go over the new hedge fund action regarding AstraZeneca plc (NYSE:AZN).
How are hedge funds trading AstraZeneca plc (NYSE:AZN)?
At the end of the fourth quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in AZN a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in AstraZeneca plc (NYSE:AZN) was held by Fisher Asset Management, which reported holding $816.2 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $430.2 million position. Other investors bullish on the company included GQG Partners, Marshall Wace LLP, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Ariose Capital allocated the biggest weight to AstraZeneca plc (NYSE:AZN), around 12.56% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, earmarking 5.66 percent of its 13F equity portfolio to AZN.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Ariose Capital, managed by Yi Xin, assembled the most valuable position in AstraZeneca plc (NYSE:AZN). Ariose Capital had $8.6 million invested in the company at the end of the quarter. Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management also initiated a $7.9 million position during the quarter. The following funds were also among the new AZN investors: Kamran Moghtaderi’s Eversept Partners, Samuel Isaly’s OrbiMed Advisors, and Philip Hempleman’s Ardsley Partners.
Let’s now take a look at hedge fund activity in other stocks similar to AstraZeneca plc (NYSE:AZN). We will take a look at Thermo Fisher Scientific Inc. (NYSE:TMO), Costco Wholesale Corporation (NASDAQ:COST), United Technologies Corporation (NYSE:UTX), and BP plc (NYSE:BP). This group of stocks’ market valuations are closest to AZN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TMO | 73 | 3607687 | 3 |
| COST | 70 | 4401660 | 7 |
| UTX | 81 | 7021856 | 7 |
| BP | 40 | 1634365 | 1 |
| Average | 66 | 4166392 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 66 hedge funds with bullish positions and the average amount invested in these stocks was $4166 million. That figure was $1901 million in AZN’s case. United Technologies Corporation (NYSE:UTX) is the most popular stock in this table. On the other hand BP plc (NYSE:BP) is the least popular one with only 40 bullish hedge fund positions. Compared to these stocks AstraZeneca plc (NYSE:AZN) is even less popular than BP. Hedge funds clearly dropped the ball on AZN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on AZN as the stock returned -8.8% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
