At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
AstraZeneca plc (NYSE:AZN) has experienced an increase in enthusiasm from smart money in recent months. AZN was in 28 hedge funds' portfolios at the end of the first quarter of 2019. There were 21 hedge funds in our database with AZN positions at the end of the previous quarter. Our calculations also showed that AZN isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
We're going to take a peek at the latest hedge fund action encompassing AstraZeneca plc (NYSE:AZN).
What have hedge funds been doing with AstraZeneca plc (NYSE:AZN)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in AZN a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher's Fisher Asset Management has the most valuable position in AstraZeneca plc (NYSE:AZN), worth close to $568.4 million, comprising 0.8% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $503.7 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining peers that are bullish comprise Thomas Steyer's Farallon Capital, Steve Cohen's Point72 Asset Management and Jim Simons's Renaissance Technologies.
Now, some big names have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, established the most valuable position in AstraZeneca plc (NYSE:AZN). Renaissance Technologies had $74.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $26.2 million position during the quarter. The following funds were also among the new AZN investors: Joseph Samuels's Islet Management, Daniel S. Och's OZ Management, and David Costen Haley's HBK Investments.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as AstraZeneca plc (NYSE:AZN) but similarly valued. We will take a look at Rio Tinto Group (NYSE:RIO), Toronto-Dominion Bank (NYSE:TD), Texas Instruments Incorporated (NASDAQ:TXN), and Diageo plc (NYSE:DEO). This group of stocks' market values are closest to AZN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RIO,22,1878270,-1 TD,18,818086,1 TXN,43,2309168,-1 DEO,16,861675,2 Average,24.75,1466800,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $1467 million. That figure was $1673 million in AZN's case. Texas Instruments Incorporated (NASDAQ:TXN) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 16 bullish hedge fund positions. AstraZeneca plc (NYSE:AZN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AZN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AZN were disappointed as the stock returned -7.2% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.