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 Abbott Laboratories (NYSE:ABT) and determine whether the smart money was really smart about this stock.
Abbott Laboratories (NYSE:ABT) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 62 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Chevron Corporation (NYSE:CVX), Eli Lilly and Company (NYSE:LLY), and The Unilever Group (NYSE:UL) to gather more data points. Our calculations also showed that ABT 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). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
[caption id="attachment_26397" align="aligncenter" width="400"] Ray Dalio of Bridgewater Associates[/caption]
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 key hedge fund action encompassing Abbott Laboratories (NYSE:ABT).
Hedge fund activity in Abbott Laboratories (NYSE:ABT)
At Q1's end, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 50 hedge funds with a bullish position in ABT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
The largest stake in Abbott Laboratories (NYSE:ABT) was held by GQG Partners, which reported holding $765.8 million worth of stock at the end of September. It was followed by Diamond Hill Capital with a $498.3 million position. Other investors bullish on the company included Fisher Asset Management, Adage Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position GQG Partners allocated the biggest weight to Abbott Laboratories (NYSE:ABT), around 5.27% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, designating 4.89 percent of its 13F equity portfolio to ABT.
Seeing as Abbott Laboratories (NYSE:ABT) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few hedgies who were dropping their entire stakes in the first quarter. Intriguingly, Samuel Isaly's OrbiMed Advisors dumped the biggest stake of all the hedgies watched by Insider Monkey, valued at close to $62.1 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also cut its stock, about $37.3 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Abbott Laboratories (NYSE:ABT) but similarly valued. We will take a look at Chevron Corporation (NYSE:CVX), Eli Lilly and Company (NYSE:LLY), The Unilever Group (NYSE:UL), and SAP SE (NYSE:SAP). This group of stocks' market valuations are closest to ABT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVX,53,1646070,6 LLY,43,1323452,0 UL,13,207786,-4 SAP,15,1386317,-1 Average,31,1140906,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1141 million. That figure was $2190 million in ABT's case. Chevron Corporation (NYSE:CVX) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Abbott Laboratories (NYSE:ABT) is more popular among hedge funds. 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 and still beat the market by 16.8 percentage points. Unfortunately ABT wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ABT were disappointed as the stock returned 14.1% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.