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Should I Buy Eli Lilly and Company (LLY)?

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·5 min read
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We at Insider Monkey have gone over 866 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. In this article, we look at what those funds think of Eli Lilly and Company (NYSE:LLY) based on that data.

Eli Lilly and Company (NYSE:LLY) was in 55 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 60. LLY has experienced an increase in support from the world's most elite money managers of late. There were 50 hedge funds in our database with LLY positions at the end of the fourth quarter. Our calculations also showed that LLY isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Robert Pohly of Samlyn Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a gander at the key hedge fund action encompassing Eli Lilly and Company (NYSE:LLY).

Do Hedge Funds Think LLY Is A Good Stock To Buy Now?

At the end of March, a total of 55 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards LLY over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Eli Lilly and Company (NYSE:LLY), which was worth $1029.1 million at the end of the fourth quarter. On the second spot was GQG Partners which amassed $374.3 million worth of shares. AQR Capital Management, Citadel Investment Group, and Adage Capital Management 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 Sphera Global Healthcare Fund allocated the biggest weight to Eli Lilly and Company (NYSE:LLY), around 6.15% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, dishing out 5.04 percent of its 13F equity portfolio to LLY.

As aggregate interest increased, key money managers were breaking ground themselves. Renaissance Technologies, established the largest position in Eli Lilly and Company (NYSE:LLY). Renaissance Technologies had $43.5 million invested in the company at the end of the quarter. Chris Rokos's Rokos Capital Management also made a $37.5 million investment in the stock during the quarter. The other funds with brand new LLY positions are Robert Pohly's Samlyn Capital, Neil Shahrestani's Ikarian Capital, and Brandon Haley's Holocene Advisors.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Eli Lilly and Company (NYSE:LLY) but similarly valued. We will take a look at Texas Instruments Incorporated (NASDAQ:TXN), BHP Group (NYSE:BHP), McDonald's Corporation (NYSE:MCD), Pinduoduo Inc. (NASDAQ:PDD), Wells Fargo & Company (NYSE:WFC), Danaher Corporation (NYSE:DHR), and Medtronic plc (NYSE:MDT). This group of stocks' market valuations match LLY's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TXN,42,2532768,-14 BHP,18,873686,-2 MCD,67,3783829,5 PDD,56,6293871,2 WFC,96,7454581,-3 DHR,81,5796963,0 MDT,65,3627546,6 Average,60.7,4337606,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.7 hedge funds with bullish positions and the average amount invested in these stocks was $4338 million. That figure was $2522 million in LLY's case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand BHP Group (NYSE:BHP) is the least popular one with only 18 bullish hedge fund positions. Eli Lilly and Company (NYSE:LLY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for LLY is 61.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on LLY as the stock returned 20.5% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

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

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