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Were Hedge Funds Right About AmerisourceBergen Corporation (ABC)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding AmerisourceBergen Corporation (NYSE:ABC) and determine whether hedge funds had an edge regarding this stock.

Is AmerisourceBergen Corporation (NYSE:ABC) going to take off soon? Prominent investors were in a bullish mood. The number of bullish hedge fund bets moved up by 1 recently. Our calculations also showed that ABC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Today there are numerous formulas market participants use to assess stocks. A couple of the most underrated formulas are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can trounce their index-focused peers by a superb amount (see the details here).

Sander Gerber Hudson Bay Capital Management

Sander Gerber of Hudson Bay Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the key hedge fund action encompassing AmerisourceBergen Corporation (NYSE:ABC).

What does smart money think about AmerisourceBergen Corporation (NYSE:ABC)?

Heading into the second quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in ABC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of AmerisourceBergen Corporation (NYSE:ABC), with a stake worth $125.8 million reported as of the end of September. Trailing AQR Capital Management was Holocene Advisors, which amassed a stake valued at $106.7 million. Baupost Group, Glenview Capital, and Antipodes Partners 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 Sivik Global Healthcare allocated the biggest weight to AmerisourceBergen Corporation (NYSE:ABC), around 4.96% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, dishing out 4.47 percent of its 13F equity portfolio to ABC.

As one would reasonably expect, some big names were leading the bulls’ herd. Antipodes Partners, managed by Jacob Mitchell, initiated the largest position in AmerisourceBergen Corporation (NYSE:ABC). Antipodes Partners had $39.8 million invested in the company at the end of the quarter. Christopher James’s Partner Fund Management also made a $30 million investment in the stock during the quarter. The other funds with brand new ABC positions are Sander Gerber’s Hudson Bay Capital Management, Michael Rockefeller and KarláKroeker’s Woodline Partners, and Krishen Sud’s Sivik Global Healthcare.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as AmerisourceBergen Corporation (NYSE:ABC) but similarly valued. These stocks are Chipotle Mexican Grill, Inc. (NYSE:CMG), Cintas Corporation (NASDAQ:CTAS), China Unicom (Hong Kong) Limited (NYSE:CHU), and Ameren Corporation (NYSE:AEE). All of these stocks’ market caps are similar to ABC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMG 48 2674255 0
CTAS 42 458144 -3
CHU 6 47948 -5
AEE 21 723627 -10
Average 29.25 975994 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $976 million. That figure was $635 million in ABC’s case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. AmerisourceBergen Corporation (NYSE:ABC) 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 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 gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately ABC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ABC were disappointed as the stock returned 14.4% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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