Were Hedge Funds Right About Anthem Inc (ANTM)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Anthem Inc (NYSE:ANTM).

Anthem Inc (NYSE:ANTM) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. Anthem Inc (NYSE:ANTM) was in 69 hedge funds’ portfolios at the end of June. The all time high for this statistics is 73. There were 70 hedge funds in our database with ANTM positions at the end of the first quarter. Our calculations also showed that ANTM isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

According to most stock holders, hedge funds are assumed to be slow, old financial tools of the past. While there are greater than 8000 funds with their doors open at the moment, Our experts choose to focus on the top tier of this club, about 850 funds. It is estimated that this group of investors handle the lion’s share of all hedge funds’ total asset base, and by keeping track of their best stock picks, Insider Monkey has unsheathed several investment strategies that have historically defeated the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ricky Sandler of Eminence Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a glance at the key hedge fund action encompassing Anthem Inc (NYSE:ANTM).

How have hedgies been trading Anthem Inc (NYSE:ANTM)?

Heading into the third quarter of 2020, a total of 69 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -1% from the previous quarter. On the other hand, there were a total of 66 hedge funds with a bullish position in ANTM a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Is ANTM A Good Stock To Buy?

Among these funds, Orbis Investment Management held the most valuable stake in Anthem Inc (NYSE:ANTM), which was worth $885.3 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $567.7 million worth of shares. Farallon Capital, AQR Capital Management, and Two Sigma Advisors 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 Brave Warrior Capital allocated the biggest weight to Anthem Inc (NYSE:ANTM), around 10.09% of its 13F portfolio. Orbis Investment Management is also relatively very bullish on the stock, designating 6.66 percent of its 13F equity portfolio to ANTM.

Since Anthem Inc (NYSE:ANTM) has experienced falling interest from the smart money, it’s safe to say that there exists a select few hedge funds who sold off their positions entirely by the end of the second quarter. Intriguingly, Andreas Halvorsen’s Viking Global dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at about $411.1 million in stock. David Fear’s fund, Thunderbird Partners, also cut its stock, about $61.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Anthem Inc (NYSE:ANTM) but similarly valued. We will take a look at Fiserv, Inc. (NASDAQ:FISV), Booking Holdings Inc. (NASDAQ:BKNG), Zoetis Inc (NYSE:ZTS), VMware, Inc. (NYSE:VMW), Automatic Data Processing (NASDAQ:ADP), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and Canadian National Railway Company (NYSE:CNI). This group of stocks’ market values are closest to ANTM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FISV 85 4642685 18
BKNG 96 6098595 6
ZTS 58 1985007 -2
VMW 42 696435 15
ADP 49 1802478 3
REGN 49 1604372 7
CNI 28 2050472 2
Average 58.1 2697149 7

View table here if you experience formatting issues.

As you can see these stocks had an average of 58.1 hedge funds with bullish positions and the average amount invested in these stocks was $2697 million. That figure was $4103 million in ANTM’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand Canadian National Railway Company (NYSE:CNI) is the least popular one with only 28 bullish hedge fund positions. Anthem Inc (NYSE:ANTM) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ANTM is 62.5. 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 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 29.2% in 2020 through October 16th and still beat the market by 19.7 percentage points. Hedge funds were also right about betting on ANTM, though not to the same extent, as the stock returned 13.3% since Q2 (through October 16th) and outperformed the market as well.

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