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 (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. Keeping this in mind, let’s analyze whether Pfizer Inc. (NYSE:PFE) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Pfizer Inc. (NYSE:PFE) going to take off soon? The best stock pickers are betting on the stock. The number of long hedge fund positions inched up by 4 recently. 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 at the end of this article for Q3 rankings).
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.
Ric Dillon of Diamond Hill Capital
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. Blockchain technology is about to go mainstream and reach heavy adoption, so we check out this tech investor’s blockchain stock pick. 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 gander at the fresh hedge fund action regarding Pfizer Inc. (NYSE:PFE).
What does smart money think about Pfizer Inc. (NYSE:PFE)?
Heading into the first quarter of 2020, a total of 62 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PFE over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Pfizer Inc. (NYSE:PFE). Fisher Asset Management has a $1.7778 billion position in the stock, comprising 1.8% of its 13F portfolio. On Fisher Asset Management’s heels 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. Other hedge funds and institutional investors with similar optimism comprise 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.
Consequently, some big names have jumped into Pfizer Inc. (NYSE:PFE) headfirst. Partner Fund Management, managed by Christopher James, established the biggest 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 initiated a $2.5 million position 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 similar to Pfizer Inc. (NYSE:PFE). These stocks are 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 match 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. 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 PFE, though not to the same extent, as the stock returned -7% during the first four months of 2020 (through April 20th) and outperformed the market as well.
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.
