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Hedge Funds Are Dumping Teva Pharmaceutical Industries Limited (TEVA)

Reymerlyn Martin

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Teva Pharmaceutical Industries Limited (NYSE:TEVA).

Teva Pharmaceutical Industries Limited (NYSE:TEVA) was in 32 hedge funds' portfolios at the end of March. TEVA has experienced a decrease in support from the world's most elite money managers in recent months. There were 35 hedge funds in our database with TEVA positions at the end of the previous quarter. Our calculations also showed that TEVA 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Barry Rosenstein JANA PARTNERS

Let's check out the new hedge fund action surrounding Teva Pharmaceutical Industries Limited (NYSE:TEVA).

What have hedge funds been doing with Teva Pharmaceutical Industries Limited (NYSE:TEVA)?

At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in TEVA a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

TEVA_jun2019

The largest stake in Teva Pharmaceutical Industries Limited (NYSE:TEVA) was held by Berkshire Hathaway, which reported holding $678.1 million worth of stock at the end of March. It was followed by Abrams Capital Management with a $283 million position. Other investors bullish on the company included Polaris Capital Management, Brahman Capital, and Highfields Capital Management.

Since Teva Pharmaceutical Industries Limited (NYSE:TEVA) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedgies that decided to sell off their entire stakes by the end of the third quarter. Interestingly, William B. Gray's Orbis Investment Management cut the largest position of all the hedgies followed by Insider Monkey, totaling an estimated $76.2 million in stock, and Barry Rosenstein's JANA Partners was right behind this move, as the fund dropped about $37.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.

Let's now take a look at hedge fund activity in other stocks similar to Teva Pharmaceutical Industries Limited (NYSE:TEVA). We will take a look at Yum China Holdings, Inc. (NYSE:YUMC), CoStar Group Inc (NASDAQ:CSGP), Franklin Resources, Inc. (NYSE:BEN), and Total System Services, Inc. (NYSE:TSS). This group of stocks' market values are closest to TEVA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YUMC,30,478911,4 CSGP,32,993601,9 BEN,28,819583,0 TSS,40,1151114,5 Average,32.5,860802,4.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $861 million. That figure was $1713 million in TEVA's case. Total System Services, Inc. (NYSE:TSS) is the most popular stock in this table. On the other hand Franklin Resources, Inc. (NYSE:BEN) is the least popular one with only 28 bullish hedge fund positions. Teva Pharmaceutical Industries Limited (NYSE:TEVA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 TEVA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TEVA investors were disappointed as the stock returned -43.6% during the same time 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.

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