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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 30th, so let’s proceed with the discussion of the hedge fund sentiment on Merck & Co., Inc. (NYSE:MRK).
Merck & Co., Inc. (NYSE:MRK) investors should be aware of a decrease in hedge fund interest recently. Merck & Co., Inc. (NYSE:MRK) was in 77 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 84. There were 79 hedge funds in our database with MRK holdings at the end of June. Our calculations also showed that MRK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we're going to take a look at the key hedge fund action encompassing Merck & Co., Inc. (NYSE:MRK).
Robert Pohly of Samlyn Capital
Do Hedge Funds Think MRK Is A Good Stock To Buy Now?
At the end of September, a total of 77 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in MRK over the last 25 quarters. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Merck & Co., Inc. (NYSE:MRK). Fisher Asset Management has a $798.7 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $493.3 million position; 0.6% of its 13F portfolio is allocated to the company. Some other peers that are bullish consist of John Overdeck and David Siegel's Two Sigma Advisors, Cliff Asness's AQR Capital Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to Merck & Co., Inc. (NYSE:MRK), around 7.47% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, setting aside 5.93 percent of its 13F equity portfolio to MRK.
Due to the fact that Merck & Co., Inc. (NYSE:MRK) has faced bearish sentiment from hedge fund managers, it's safe to say that there exists a select few money managers who sold off their positions entirely in the third quarter. At the top of the heap, Warren Buffett's Berkshire Hathaway cut the largest stake of the 750 funds monitored by Insider Monkey, worth close to $712.2 million in stock, and Chris Rokos's Rokos Capital Management was right behind this move, as the fund cut about $76.5 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds in the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Merck & Co., Inc. (NYSE:MRK) but similarly valued. These stocks are AstraZeneca plc (NYSE:AZN), Novartis AG (NYSE:NVS), McDonald's Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), Texas Instruments Incorporated (NASDAQ:TXN), Sea Limited (NYSE:SE), and Shopify Inc (NYSE:SHOP). This group of stocks' market caps are closest to MRK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AZN,41,3757394,4 NVS,22,1439973,0 MCD,58,3339098,-8 MS,65,4990950,-4 TXN,40,1938965,-10 SE,117,14135309,13 SHOP,73,11451372,-12 Average,59.4,5864723,-2.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 59.4 hedge funds with bullish positions and the average amount invested in these stocks was $5865 million. That figure was $4551 million in MRK's case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 bullish hedge fund positions. Merck & Co., Inc. (NYSE:MRK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MRK is 59.4. 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. 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 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately MRK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on MRK were disappointed as the stock returned -0.3% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.