Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Pfizer Inc. (NYSE:PFE).
Pfizer Inc. (NYSE:PFE) was in 62 hedge funds’ portfolios at the end of the fourth quarter of 2019. PFE investors should be aware of an increase in hedge fund sentiment in recent months. There were 58 hedge funds in our database with PFE holdings at the end of the previous quarter. Our calculations also showed that PFE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 indicators market participants have at their disposal to size up publicly traded companies. A couple of the most useful indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the market by a significant margin (see the details here).
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. With all of this in mind let’s view the key hedge fund action encompassing Pfizer Inc. (NYSE:PFE).
Hedge fund activity in Pfizer Inc. (NYSE:PFE)
Heading into the first quarter of 2020, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. On the other hand, there were a total of 59 hedge funds with a bullish position in PFE a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Pfizer Inc. (NYSE:PFE), worth close to $1.7778 billion, comprising 1.8% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $516.7 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions include Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Ric Dillon’s Diamond Hill Capital. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Pfizer Inc. (NYSE:PFE), around 3.85% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, setting aside 3.55 percent of its 13F equity portfolio to PFE.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Partner Fund Management, managed by Christopher James, created the largest position in Pfizer Inc. (NYSE:PFE). Partner Fund Management had $36.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $2.5 million investment in the stock during the quarter. The following funds were also among the new PFE investors: Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Minhua Zhang’s Weld Capital Management, and Nathan Przybylo’s L2 Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Pfizer Inc. (NYSE:PFE) but similarly valued. We will take a look at Novartis AG (NYSE:NVS), Comcast Corporation (NASDAQ:CMCSA), Cisco Systems, Inc. (NASDAQ:CSCO), and Toyota Motor Corporation (NYSE:TM). This group of stocks’ market values are similar to PFE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVS | 30 | 2054513 | 2 |
| CMCSA | 87 | 6747748 | -3 |
| CSCO | 68 | 4029813 | 3 |
| TM | 12 | 249046 | 0 |
| Average | 49.25 | 3270280 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.25 hedge funds with bullish positions and the average amount invested in these stocks was $3270 million. That figure was $4839 million in PFE’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 12 bullish hedge fund positions. Pfizer Inc. (NYSE:PFE) 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. 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 also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately PFE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PFE were disappointed as the stock returned -10.1% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
