We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like AmerisourceBergen Corporation (NYSE:ABC).
AmerisourceBergen Corporation (NYSE:ABC) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 36 hedge funds' portfolios at the end of the third quarter of 2019. 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 Franco-Nevada Corporation (NYSE:FNV), Yum China Holdings, Inc. (NYSE:YUMC), and Martin Marietta Materials, Inc. (NYSE:MLM) to gather more data points. Our calculations also showed that ABC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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' 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26869" align="aligncenter" width="508"] Larry Robbins of Glenview Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the fresh hedge fund action regarding AmerisourceBergen Corporation (NYSE:ABC).
Hedge fund activity in AmerisourceBergen Corporation (NYSE:ABC)
Heading into the fourth quarter of 2019, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ABC over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Glenview Capital held the most valuable stake in AmerisourceBergen Corporation (NYSE:ABC), which was worth $103.8 million at the end of the third quarter. On the second spot was Baupost Group which amassed $96 million worth of shares. Bridgewater Associates, AQR Capital Management, and GLG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to AmerisourceBergen Corporation (NYSE:ABC), around 2.97% of its portfolio. Sio Capital is also relatively very bullish on the stock, setting aside 2.73 percent of its 13F equity portfolio to ABC.
Judging by the fact that AmerisourceBergen Corporation (NYSE:ABC) has witnessed falling interest from hedge fund managers, we can see that there were a few hedge funds who sold off their entire stakes by the end of the third quarter. At the top of the heap, Israel Englander's Millennium Management sold off the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $40.6 million in stock. Clint Carlson's fund, Carlson Capital, also sold off its stock, about $15.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to AmerisourceBergen Corporation (NYSE:ABC). These stocks are Franco-Nevada Corporation (NYSE:FNV), Yum China Holdings, Inc. (NYSE:YUMC), Martin Marietta Materials, Inc. (NYSE:MLM), and Omnicom Group Inc. (NYSE:OMC). All of these stocks' market caps are similar to ABC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FNV,22,750908,4 YUMC,29,465970,1 MLM,40,2550137,0 OMC,24,478571,1 Average,28.75,1061397,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $1061 million. That figure was $435 million in ABC's case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 22 bullish hedge fund positions. AmerisourceBergen Corporation (NYSE:ABC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on ABC, though not to the same extent, as the stock returned 7.3% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.