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Walgreens Boots Alliance Inc (WBA): Are Hedge Funds Right About This Stock?

Abigail Fisher

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Walgreens Boots Alliance Inc (NASDAQ:WBA) based on that data.

Is Walgreens Boots Alliance Inc (NASDAQ:WBA) ready to rally soon? Investors who are in the know are in a bullish mood. The number of long hedge fund positions rose by 7 recently. Our calculations also showed that WBA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are seen as worthless, old investment vehicles of the past. While there are over 8000 funds with their doors open today, Our experts hone in on the top tier of this club, about 850 funds. These money managers control the majority of all hedge funds' total capital, and by keeping an eye on their best investments, Insider Monkey has formulated several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

[caption id="attachment_193030" align="aligncenter" width="399"] Tom Gayner of Markel Gayner Asset Management[/caption]

Tom Gayner

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the fresh hedge fund action regarding Walgreens Boots Alliance Inc (NASDAQ:WBA).

Hedge fund activity in Walgreens Boots Alliance Inc (NASDAQ:WBA)

Heading into the second quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WBA over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Overdeck and David Siegel's Two Sigma Advisors has the biggest position in Walgreens Boots Alliance Inc (NASDAQ:WBA), worth close to $83.6 million, comprising 0.3% of its total 13F portfolio. On Two Sigma Advisors's heels is Markel Gayner Asset Management, led by Tom Gayner, holding a $81.5 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Cliff Asness's AQR Capital Management, Phill Gross and Robert Atchinson's Adage Capital Management and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Game Creek Capital allocated the biggest weight to Walgreens Boots Alliance Inc (NASDAQ:WBA), around 2.05% of its 13F portfolio. Healthcare Value Capital is also relatively very bullish on the stock, setting aside 1.92 percent of its 13F equity portfolio to WBA.

Consequently, key money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, assembled the most valuable position in Walgreens Boots Alliance Inc (NASDAQ:WBA). Alyeska Investment Group had $26.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $23.5 million position during the quarter. The other funds with brand new WBA positions are David Rosen's Rubric Capital Management, Michael Rockefeller and KarláKroeker's Woodline Partners, and Bhagwan Jay Rao's Integral Health Asset Management.

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. These stocks are Equinor ASA (NYSE:EQNR), Illumina, Inc. (NASDAQ:ILMN), Moody's Corporation (NYSE:MCO), and American Electric Power Company, Inc. (NYSE:AEP). This group of stocks' market values are similar to WBA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EQNR,11,281375,-3 ILMN,34,1130705,-9 MCO,50,8552785,1 AEP,38,1070882,4 Average,33.25,2758937,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $2759 million. That figure was $461 million in WBA's case. Moody's Corporation (NYSE:MCO) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 11 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. Unfortunately WBA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on WBA were disappointed as the stock returned -12.5% during the same time period 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 many of these stocks already outperformed the market so far this year.

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

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