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Was The Smart Money Right About Piling Into AmerisourceBergen (ABC)?

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·6 min read
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In this article we are going to use hedge fund sentiment as a tool and determine whether AmerisourceBergen Corporation (NYSE:ABC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

AmerisourceBergen Corporation (NYSE:ABC) investors should pay attention to an increase in support from the world's most elite money managers lately. AmerisourceBergen Corporation (NYSE:ABC) was in 47 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 45 hedge funds in our database with ABC positions at the end of the third quarter. Our calculations also showed that ABC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In today’s marketplace there are a large number of signals stock traders employ to assess publicly traded companies. A duo of the most under-the-radar signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the S&P 500 by a very impressive margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

10 best stocks according to billionaire Larry Robbins
10 best stocks according to billionaire Larry Robbins

Larry Robbins of Glenview Capital

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 recent hedge fund action encompassing AmerisourceBergen Corporation (NYSE:ABC).

Do Hedge Funds Think ABC Is A Good Stock To Buy Now?

At fourth quarter's end, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in ABC a year ago. 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 AmerisourceBergen Corporation (NYSE:ABC) was held by AQR Capital Management, which reported holding $141.7 million worth of stock at the end of December. It was followed by Glenview Capital with a $85.6 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Antipodes Partners. In terms of the portfolio weights assigned to each position HealthInvest Partners AB allocated the biggest weight to AmerisourceBergen Corporation (NYSE:ABC), around 6.02% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, setting aside 5.36 percent of its 13F equity portfolio to ABC.

As industrywide interest jumped, key hedge funds were leading the bulls' herd. Sandler Capital Management, managed by Andrew Sandler, created the most valuable position in AmerisourceBergen Corporation (NYSE:ABC). Sandler Capital Management had $14.2 million invested in the company at the end of the quarter. Anders Hallberg and Carl Bennet's HealthInvest Partners AB also made a $9.1 million investment in the stock during the quarter. The other funds with brand new ABC positions are Vishal Saluja and Pham Quang's Endurant Capital Management, Paul Tudor Jones's Tudor Investment Corp, and Parvinder Thiara's Athanor Capital.

Let's also examine hedge fund activity in other stocks similar to AmerisourceBergen Corporation (NYSE:ABC). These stocks are EXACT Sciences Corporation (NASDAQ:EXAS), Teradyne, Inc. (NASDAQ:TER), POSCO (NYSE:PKX), Laboratory Corp. of America Holdings (NYSE:LH), Vulcan Materials Company (NYSE:VMC), Fifth Third Bancorp (NASDAQ:FITB), and BioNTech SE (NASDAQ:BNTX). This group of stocks' market caps resemble ABC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXAS,40,1898594,6 TER,47,1417981,5 PKX,10,130115,-1 LH,66,1873964,9 VMC,44,1337772,2 FITB,43,506319,13 BNTX,17,170450,0 Average,38.1,1047885,4.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1048 million. That figure was $681 million in ABC's case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 10 bullish hedge fund positions. AmerisourceBergen Corporation (NYSE:ABC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABC is 70. 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. 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 still beat the market by 1.6 percentage points. Hedge funds were also right about betting on ABC as the stock returned 24.1% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.

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