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Were Hedge Funds Right About AbbVie Inc (ABBV)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about AbbVie Inc (NYSE:ABBV).

Is AbbVie Inc (NYSE:ABBV) a sound investment right now? The smart money is taking an optimistic view. The number of long hedge fund bets went up by 3 in recent months. Our calculations also showed that ABBV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). ABBV was in 71 hedge funds’ portfolios at the end of December. There were 68 hedge funds in our database with ABBV positions at the end of the previous quarter.

In today’s marketplace there are a lot of tools investors use to evaluate their stock investments. Some of the most useful tools are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can outpace their index-focused peers by a significant margin (see the details here).

CAPITAL GROWTH MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations We are probably at the peak of the COVID-19 pandemic, so we check out this biotech investor’s coronavirus picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the latest hedge fund action encompassing AbbVie Inc (NYSE:ABBV).

How are hedge funds trading AbbVie Inc (NYSE:ABBV)?

At Q4’s end, a total of 71 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the third quarter of 2019. On the other hand, there were a total of 46 hedge funds with a bullish position in ABBV a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Is ABBV A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Orbis Investment Management, managed by William B. Gray, holds the biggest position in AbbVie Inc (NYSE:ABBV). Orbis Investment Management has a $1.4253 billion position in the stock, comprising 10% of its 13F portfolio. Coming in second is Renaissance Technologies, with a $1.0445 billion position; 0.8% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish contain John Overdeck and David Siegel’s Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to AbbVie Inc (NYSE:ABBV), around 13.03% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, designating 9.95 percent of its 13F equity portfolio to ABBV.

Now, some big names have jumped into AbbVie Inc (NYSE:ABBV) headfirst. Partner Fund Management, managed by Christopher James, established the biggest position in AbbVie Inc (NYSE:ABBV). Partner Fund Management had $14.7 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $8.6 million position during the quarter. The following funds were also among the new ABBV investors: Bhagwan Jay Rao’s Integral Health Asset Management, Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management, and Ken Heebner’s Capital Growth Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as AbbVie Inc (NYSE:ABBV) but similarly valued. These stocks are AstraZeneca plc (NYSE:AZN), Thermo Fisher Scientific Inc. (NYSE:TMO), Costco Wholesale Corporation (NASDAQ:COST), and United Technologies Corporation (NYSE:UTX). This group of stocks’ market valuations resemble ABBV’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AZN 32 1901127 4
TMO 73 3607687 3
COST 70 4401660 7
UTX 81 7021856 7
Average 64 4233083 5.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 64 hedge funds with bullish positions and the average amount invested in these stocks was $4233 million. That figure was $5288 million in ABBV’s case. United Technologies Corporation (NYSE:UTX) is the most popular stock in this table. On the other hand AstraZeneca plc (NYSE:AZN) is the least popular one with only 32 bullish hedge fund positions. AbbVie Inc (NYSE:ABBV) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on ABBV, though not to the same extent, as the stock returned -2.4% during the first four months of 2020 (through April 20th) and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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