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AstraZeneca plc (AZN) vs. Top 20 Hedge Fund Stocks in 2019

Reymerlyn Martin

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ complex research processes to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space. Nevertheless, it is also possible to find underpriced large-cap stocks by following the hedge funds' moves. In this article, we look at what those funds think of AstraZeneca plc (NYSE:AZN) based on that data.

AstraZeneca plc (NYSE:AZN) investors should be aware of an increase in activity from the world's largest hedge funds in recent months. Our calculations also showed that AZN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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 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 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.

[caption id="attachment_340081" align="aligncenter" width="600"] Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Now let's take a look at the latest hedge fund action surrounding AstraZeneca plc (NYSE:AZN).

Hedge fund activity in AstraZeneca plc (NYSE:AZN)

At Q3's end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AZN over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher's Fisher Asset Management has the biggest position in AstraZeneca plc (NYSE:AZN), worth close to $724.8 million, accounting for 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $382.8 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Some other peers that hold long positions comprise Rajiv Jain's GQG Partners, Farallon Capital and Paul Marshall and Ian Wace's Marshall Wace. In terms of the portfolio weights assigned to each position GQG Partners allocated the biggest weight to AstraZeneca plc (NYSE:AZN), around 2.69% of its 13F portfolio. Sivik Global Healthcare is also relatively very bullish on the stock, earmarking 1.8 percent of its 13F equity portfolio to AZN.

As one would reasonably expect, key money managers were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the largest position in AstraZeneca plc (NYSE:AZN). Adage Capital Management had $22.3 million invested in the company at the end of the quarter. Simon Sadler's Segantii Capital also initiated a $3.9 million position during the quarter. The other funds with new positions in the stock are Nick Thakore's Diametric Capital, Donald Sussman's Paloma Partners, and Karim Abbadi and Edward McBride's Centiva Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as AstraZeneca plc (NYSE:AZN) but similarly valued. These stocks are Thermo Fisher Scientific Inc. (NYSE:TMO), Royal Bank of Canada (NYSE:RY), Amgen, Inc. (NASDAQ:AMGN), and Sanofi (NASDAQ:SNY). All of these stocks' market caps are closest to AZN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMO,65,3444543,-7 RY,17,491191,2 AMGN,48,2569750,6 SNY,27,985072,2 Average,39.25,1872639,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $1873 million. That figure was $1779 million in AZN's case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 17 bullish hedge fund positions. AstraZeneca plc (NYSE:AZN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on AZN, though not to the same extent, as the stock returned 35.7% in 2019 and surpassed the market. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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