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Were Hedge Funds Right About Piling Into AbbVie Inc (ABBV)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded AbbVie Inc (NYSE:ABBV) and determine whether the smart money was really smart about this stock.

Is AbbVie Inc (NYSE:ABBV) the right investment to pursue these days? Investors who are in the know were betting on the stock and the number of long hedge fund bets went up by 10 in Q1. Our calculations also showed that ABBV 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). ABBV was in 81 hedge funds’ portfolios at the end of March. There were 71 hedge funds in our database with ABBV positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Steven Cohen

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. Now we’re going to go over the latest hedge fund action surrounding AbbVie Inc (NYSE:ABBV).

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

At the end of the first quarter, a total of 81 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the fourth quarter of 2019. By comparison, 47 hedge funds held shares or bullish call options 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?

When looking at the institutional investors followed by Insider Monkey,  Renaissance Technologies has the largest position in AbbVie Inc (NYSE:ABBV), worth close to $1.0328 billion, comprising 1% of its total 13F portfolio. The second largest stake is held by Orbis Investment Management, managed by William B. Gray, which holds a $1.0316 billion position; the fund has 9.8% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and  Farallon Capital. In terms of the portfolio weights assigned to each position Orbis Investment Management allocated the biggest weight to AbbVie Inc (NYSE:ABBV), around 9.82% of its 13F portfolio. Logos Capital is also relatively very bullish on the stock, dishing out 7.7 percent of its 13F equity portfolio to ABBV.

Now, key money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized position in AbbVie Inc (NYSE:ABBV). Point72 Asset Management had $106 million invested in the company at the end of the quarter. Stephen DuBois’s Camber Capital Management also made a $91.4 million investment in the stock during the quarter. The following funds were also among the new ABBV investors: Robert Pohly’s Samlyn Capital, Arthur B Cohen and Joseph Healey’s Healthcor Management LP, and Henrik Rhenman’s Rhenman & Partners Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as AbbVie Inc (NYSE:ABBV) but similarly valued. These stocks are Paypal Holdings Inc (NASDAQ:PYPL), ASML Holding N.V. (NASDAQ:ASML), Sanofi (NYSE:SNY), and Accenture Plc (NYSE:ACN). This group of stocks’ market caps are closest to ABBV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PYPL 118 4659097 -8
ASML 30 1505012 8
SNY 15 970814 -16
ACN 49 1003250 8
Average 53 2034543 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 53 hedge funds with bullish positions and the average amount invested in these stocks was $2035 million. That figure was $5118 million in ABBV’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Sanofi (NYSE:SNY) is the least popular one with only 15 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 gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on ABBV as the stock returned 29.2% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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