"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Anthem Inc (NYSE:ANTM) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Anthem Inc (NYSE:ANTM) investors should be aware of a decrease in hedge fund interest in recent months. ANTM was in 59 hedge funds' portfolios at the end of the third quarter of 2019. There were 66 hedge funds in our database with ANTM holdings at the end of the previous quarter. Our calculations also showed that ANTM 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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_26082" align="aligncenter" width="466"] Andreas Halvorsen of Viking Global[/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. Let's take a look at the latest hedge fund action encompassing Anthem Inc (NYSE:ANTM).
How have hedgies been trading Anthem Inc (NYSE:ANTM)?
At the end of the third quarter, a total of 59 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 63 hedge funds with a bullish position in ANTM a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Viking Global held the most valuable stake in Anthem Inc (NYSE:ANTM), which was worth $930 million at the end of the third quarter. On the second spot was Orbis Investment Management which amassed $548.4 million worth of shares. AQR Capital Management, Farallon Capital, and Glenview Capital 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 Brave Warrior Capital allocated the biggest weight to Anthem Inc (NYSE:ANTM), around 8.18% of its portfolio. Viking Global is also relatively very bullish on the stock, setting aside 4.84 percent of its 13F equity portfolio to ANTM.
Because Anthem Inc (NYSE:ANTM) has witnessed falling interest from the aggregate hedge fund industry, we can see that there is a sect of hedgies who were dropping their entire stakes heading into Q4. It's worth mentioning that Anand Parekh's Alyeska Investment Group dropped the largest stake of the 750 funds tracked by Insider Monkey, worth close to $71.1 million in stock, and Jacob Doft's Highline Capital Management was right behind this move, as the fund sold off about $69.4 million worth. These moves are interesting, as aggregate hedge fund interest fell by 7 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Anthem Inc (NYSE:ANTM). These stocks are VMware, Inc. (NYSE:VMW), S&P Global Inc. (NYSE:SPGI), Zoetis Inc (NYSE:ZTS), and Vale SA (NYSE:VALE). This group of stocks' market caps are similar to ANTM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VMW,35,985185,1 SPGI,69,3925199,11 ZTS,46,2229489,6 VALE,28,1453835,7 Average,44.5,2148427,6.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.5 hedge funds with bullish positions and the average amount invested in these stocks was $2148 million. That figure was $3722 million in ANTM's case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand Vale SA (NYSE:VALE) is the least popular one with only 28 bullish hedge fund positions. Anthem Inc (NYSE:ANTM) 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 ANTM as the stock returned 20.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.