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Is Abbott Laboratories (ABT) Going to Burn These Hedge Funds?

·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Abbott Laboratories (NYSE:ABT).

Abbott Laboratories (NYSE:ABT) shareholders have witnessed an increase in hedge fund interest recently. Abbott Laboratories (NYSE:ABT) was in 65 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 67. Our calculations also showed that ABT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Rajiv Jain of GQG Partners
Rajiv Jain of GQG Partners

Rajiv Jain of GQG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let's take a glance at the recent hedge fund action regarding Abbott Laboratories (NYSE:ABT).

Do Hedge Funds Think ABT Is A Good Stock To Buy Now?

At Q1's end, a total of 65 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from the previous quarter. On the other hand, there were a total of 62 hedge funds with a bullish position in ABT a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, GQG Partners, managed by Rajiv Jain, holds the number one position in Abbott Laboratories (NYSE:ABT). GQG Partners has a $1.5377 billion position in the stock, comprising 5.6% of its 13F portfolio. The second largest stake is held by Ken Fisher of Fisher Asset Management, with a $932.8 million position; 0.7% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish consist of Ric Dillon's Diamond Hill Capital, Cliff Asness's AQR Capital Management and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position GQG Partners allocated the biggest weight to Abbott Laboratories (NYSE:ABT), around 5.62% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, dishing out 5.09 percent of its 13F equity portfolio to ABT.

As aggregate interest increased, specific money managers have jumped into Abbott Laboratories (NYSE:ABT) headfirst. Steadfast Capital Management, managed by Robert Pitts, established the most outsized position in Abbott Laboratories (NYSE:ABT). Steadfast Capital Management had $158.7 million invested in the company at the end of the quarter. Daniel S. Och's OZ Management also made a $148.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Tim Hurd and Ed Magnus's BlueSpruce Investments, Renaissance Technologies, and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's also examine hedge fund activity in other stocks similar to Abbott Laboratories (NYSE:ABT). These stocks are NIKE, Inc. (NYSE:NKE), Oracle Corporation (NYSE:ORCL), Pfizer Inc. (NYSE:PFE), Chevron Corporation (NYSE:CVX), PepsiCo, Inc. (NASDAQ:PEP), salesforce.com, inc. (NYSE:CRM), and Merck & Co., Inc. (NYSE:MRK). This group of stocks' market caps match ABT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NKE,78,5176711,-4 ORCL,52,2888444,0 PFE,65,2014186,2 CVX,41,4866758,-9 PEP,61,4882404,5 CRM,91,8837040,-6 MRK,79,6494373,-3 Average,66.7,5022845,-2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 66.7 hedge funds with bullish positions and the average amount invested in these stocks was $5023 million. That figure was $5137 million in ABT's case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Chevron Corporation (NYSE:CVX) is the least popular one with only 41 bullish hedge fund positions. Abbott Laboratories (NYSE:ABT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABT is 59.1. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately ABT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ABT investors were disappointed as the stock returned -7.9% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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