A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Walgreens Boots Alliance Inc (NASDAQ:WBA).
Walgreens Boots Alliance Inc (NASDAQ:WBA) was in 34 hedge funds' portfolios at the end of the third quarter of 2019. WBA has experienced a decrease in support from the world's most elite money managers recently. There were 41 hedge funds in our database with WBA holdings at the end of the previous quarter. Our calculations also showed that WBA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the new hedge fund action encompassing Walgreens Boots Alliance Inc (NASDAQ:WBA).
How are hedge funds trading Walgreens Boots Alliance Inc (NASDAQ:WBA)?
At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WBA over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Walgreens Boots Alliance Inc (NASDAQ:WBA) was held by Two Sigma Advisors, which reported holding $187 million worth of stock at the end of September. It was followed by Markel Gayner Asset Management with a $118.9 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and D E Shaw. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to Walgreens Boots Alliance Inc (NASDAQ:WBA), around 5% of its portfolio. Markel Gayner Asset Management is also relatively very bullish on the stock, setting aside 1.8 percent of its 13F equity portfolio to WBA.
Judging by the fact that Walgreens Boots Alliance Inc (NASDAQ:WBA) has witnessed declining sentiment from the smart money, it's easy to see that there is a sect of funds who sold off their entire stakes heading into Q4. Interestingly, Renaissance Technologies said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $18.8 million in stock, and Matthew Tewksbury's Stevens Capital Management was right behind this move, as the fund dumped about $12.9 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 7 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Walgreens Boots Alliance Inc (NASDAQ:WBA) but similarly valued. We will take a look at Suncor Energy Inc. (NYSE:SU), America Movil SAB de CV (NYSE:AMX), Equinix, Inc. (REIT) (NASDAQ:EQIX), and Air Products and Chemicals, Inc. (NYSE:APD). This group of stocks' market caps match WBA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SU,37,1416790,5 AMX,9,188555,0 EQIX,33,1580931,-5 APD,38,478746,6 Average,29.25,916256,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $916 million. That figure was $831 million in WBA's case. Air Products and Chemicals, Inc. (NYSE:APD) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 9 bullish hedge fund positions. Walgreens Boots Alliance Inc (NASDAQ:WBA) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on WBA, though not to the same extent, as the stock returned 8.6% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.