Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Eli Lilly and Company (NYSE:LLY).
Eli Lilly and Company (NYSE:LLY) has seen a decrease in support from the world's most elite money managers of late. Our calculations also showed that LLY isn't among the 30 most popular stocks among hedge funds. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are viewed as underperforming, outdated investment vehicles of the past. While there are more than 8000 funds with their doors open at present, Our experts look at the moguls of this group, about 750 funds. These money managers orchestrate the lion's share of all hedge funds' total asset base, and by observing their highest performing investments, Insider Monkey has identified several investment strategies that have historically outpaced the broader indices. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the recent hedge fund action surrounding Eli Lilly and Company (NYSE:LLY).
What does smart money think about Eli Lilly and Company (NYSE:LLY)?
At the end of the second quarter, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LLY over the last 16 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Eli Lilly and Company (NYSE:LLY), with a stake worth $480 million reported as of the end of March. Trailing AQR Capital Management was Fisher Asset Management, which amassed a stake valued at $457.3 million. Renaissance Technologies, Arrowstreet Capital, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Because Eli Lilly and Company (NYSE:LLY) has witnessed declining sentiment from the smart money, we can see that there lies a certain "tier" of fund managers who were dropping their positions entirely heading into Q3. Interestingly, Matthew Halbower's Pentwater Capital Management sold off the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling close to $64.9 million in stock, and Principal Global Investors's Columbus Circle Investors was right behind this move, as the fund dumped about $38.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let's go over hedge fund activity in other stocks similar to Eli Lilly and Company (NYSE:LLY). We will take a look at Linde plc (NYSE:LIN), AbbVie Inc (NYSE:ABBV), Sanofi (NASDAQ:SNY), and AstraZeneca plc (NYSE:AZN). All of these stocks' market caps are closest to LLY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LIN,41,1865465,4 ABBV,55,4126440,8 SNY,25,914861,-1 AZN,24,1602389,-4 Average,36.25,2127289,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $2127 million. That figure was $1872 million in LLY's case. AbbVie Inc (NYSE:ABBV) is the most popular stock in this table. On the other hand AstraZeneca plc (NYSE:AZN) is the least popular one with only 24 bullish hedge fund positions. Eli Lilly and Company (NYSE:LLY) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately LLY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on LLY were disappointed as the stock returned 1.5% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.