Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Pfizer Inc. (NYSE:PFE)? The smart money sentiment can provide an answer to this question.
Is Pfizer Inc. (NYSE:PFE) an excellent investment now? The best stock pickers are in an optimistic mood. The number of bullish hedge fund positions rose by 1 lately. Our calculations also showed that PFE isn’t among the 30 most popular stocks among hedge funds. PFE was in 59 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 58 hedge funds in our database with PFE holdings at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to check out the key hedge fund action surrounding Pfizer Inc. (NYSE:PFE).
How are hedge funds trading Pfizer Inc. (NYSE:PFE)?
At Q4’s end, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. By comparison, 51 hedge funds held shares or bullish call options in PFE a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Pfizer Inc. (NYSE:PFE) was held by Fisher Asset Management, which reported holding $1825.9 million worth of stock at the end of September. It was followed by AQR Capital Management with a $1189.2 million position. Other investors bullish on the company included Adage Capital Management, Diamond Hill Capital, and Levin Capital Strategies.
As aggregate interest increased, some big names were leading the bulls’ herd. Partner Fund Management, managed by Christopher James, assembled the most outsized position in Pfizer Inc. (NYSE:PFE). Partner Fund Management had $40.7 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also initiated a $22.7 million position during the quarter. The other funds with brand new PFE positions are Israel Englander’s Millennium Management, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s go over hedge fund activity in other stocks similar to Pfizer Inc. (NYSE:PFE). We will take a look at Bank of America Corporation (NYSE:BAC), UnitedHealth Group Inc. (NYSE:UNH), Verizon Communications Inc. (NYSE:VZ), and The Procter & Gamble Company (NYSE:PG). This group of stocks’ market caps are similar to PFE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 75.75 hedge funds with bullish positions and the average amount invested in these stocks was $11320 million. That figure was $4675 million in PFE’s case. Bank of America Corporation (NYSE:BAC) is the most popular stock in this table. On the other hand The Procter & Gamble Company (NYSE:PG) is the least popular one with only 60 bullish hedge fund positions. Compared to these stocks Pfizer Inc. (NYSE:PFE) is even less popular than PG. So, we can say that overall hedge fund sentiment towards PFE is bearish. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately PFE wasn’t in this group. Hedge funds that bet on PFE were disappointed as the stock lost 3.4% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.