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How Did AbbVie Inc (ABBV) Perform In Comparison to Hedge Fund Favorites in 2019?

Abigail Fisher

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

AbbVie Inc (NYSE:ABBV) has experienced an increase in hedge fund sentiment lately. ABBV was in 61 hedge funds' portfolios at the end of September. There were 55 hedge funds in our database with ABBV positions at the end of the previous quarter. Our calculations also showed that ABBV 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).

To most market participants, hedge funds are assumed to be worthless, outdated investment vehicles of the past. While there are over 8000 funds in operation at the moment, Our researchers look at the elite of this group, approximately 750 funds. These investment experts command most of the smart money's total asset base, and by paying attention to their first-class investments, Insider Monkey has revealed various investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_530612" align="aligncenter" width="450"] Frank Brosens of Taconic Capital[/caption]

Frank Brosens Taconic Capital

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his 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. Keeping this in mind let's take a glance at the recent hedge fund action encompassing AbbVie Inc (NYSE:ABBV).

How are hedge funds trading AbbVie Inc (NYSE:ABBV)?

At Q3's end, a total of 61 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ABBV over the last 17 quarters. With hedge funds' capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Orbis Investment Management held the most valuable stake in AbbVie Inc (NYSE:ABBV), which was worth $1304.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $565.2 million worth of shares. Renaissance Technologies, Two Sigma Advisors, and D E Shaw 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 Orbis Investment Management allocated the biggest weight to AbbVie Inc (NYSE:ABBV), around 9.63% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 9.3 percent of its 13F equity portfolio to ABBV.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls' herd. Farallon Capital, assembled the most valuable position in AbbVie Inc (NYSE:ABBV). Farallon Capital had $75.7 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also initiated a $57.4 million position during the quarter. The following funds were also among the new ABBV investors: Brian Ashford-Russell and Tim Woolley's Polar Capital, Stephen DuBois's Camber Capital Management, and Frank Brosens's Taconic Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as AbbVie Inc (NYSE:ABBV) but similarly valued. These stocks are Lockheed Martin Corporation (NYSE:LMT), Broadcom Inc (NASDAQ:AVGO), BHP Group (NYSE:BBL), and Eli Lilly and Company (NYSE:LLY). All of these stocks' market caps match ABBV's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LMT,46,1782982,-2 AVGO,54,2515014,1 BBL,21,970915,1 LLY,41,1489505,-2 Average,40.5,1689604,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $1690 million. That figure was $4435 million in ABBV's case. Broadcom Inc (NASDAQ:AVGO) is the most popular stock in this table. On the other hand BHP Group (NYSE:BBL) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks AbbVie Inc (NYSE:ABBV) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately ABBV wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ABBV were disappointed as the stock returned 3.4% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019. 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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