Was The Smart Money Right About Pfizer Inc. (PFE)?
Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Pfizer Inc. (NYSE:PFE) changed recently.
Is Pfizer Inc. (NYSE:PFE) a first-rate stock to buy now? Money managers were becoming less confident. The number of bullish hedge fund positions went down by 3 recently. Pfizer Inc. (NYSE:PFE) was in 63 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 119. Our calculations also showed that PFE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 66 hedge funds in our database with PFE positions at the end of the third quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we're going to check out the new hedge fund action encompassing Pfizer Inc. (NYSE:PFE).
Do Hedge Funds Think PFE Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PFE over the last 22 quarters. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Diamond Hill Capital was the largest shareholder of Pfizer Inc. (NYSE:PFE), with a stake worth $337.9 million reported as of the end of December. Trailing Diamond Hill Capital was Two Sigma Advisors, which amassed a stake valued at $268.9 million. Citadel Investment Group, AQR Capital Management, and OrbiMed Advisors 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 Game Creek Capital allocated the biggest weight to Pfizer Inc. (NYSE:PFE), around 4.9% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, earmarking 4.33 percent of its 13F equity portfolio to PFE.
Since Pfizer Inc. (NYSE:PFE) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there was a specific group of hedge funds that elected to cut their full holdings last quarter. Interestingly, Warren Buffett's Berkshire Hathaway said goodbye to the largest investment of the "upper crust" of funds monitored by Insider Monkey, worth close to $136.2 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dropped about $54.1 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Pfizer Inc. (NYSE:PFE). We will take a look at salesforce.com, inc. (NYSE:CRM), Intel Corporation (NASDAQ:INTC), Abbott Laboratories (NYSE:ABT), Oracle Corporation (NASDAQ:ORCL), AbbVie Inc (NYSE:ABBV), Cisco Systems, Inc. (NASDAQ:CSCO), and Thermo Fisher Scientific Inc. (NYSE:TMO). This group of stocks' market valuations resemble PFE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRM,97,10576035,-9 INTC,72,5578824,6 ABT,64,4303482,2 ORCL,52,2450210,-4 ABBV,83,6965013,1 CSCO,60,4974309,1 TMO,89,5470797,9 Average,73.9,5759810,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 73.9 hedge funds with bullish positions and the average amount invested in these stocks was $5760 million. That figure was $1848 million in PFE's case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Oracle Corporation (NASDAQ:ORCL) is the least popular one with only 52 bullish hedge fund positions. Pfizer Inc. (NYSE:PFE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PFE is 30.1. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately PFE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); PFE investors were disappointed as the stock returned 6.1% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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