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Were Hedge Funds Right About Abandoning Abbott Laboratories (ABT)?

Nina Todic

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 730 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 28th, 2019. What do these smart investors think about Abbott Laboratories (NYSE:ABT)?

Abbott Laboratories (NYSE:ABT) has experienced a decrease in support from the world's most elite money managers in recent months. ABT was in 47 hedge funds' portfolios at the end of the second quarter of 2019. There were 50 hedge funds in our database with ABT holdings at the end of the previous quarter. Our calculations also showed that ABT isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Arthur B Cohen and Joseph Healey, Healthcor Management LP

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a gander at the latest hedge fund action surrounding Abbott Laboratories (NYSE:ABT).

Hedge fund activity in Abbott Laboratories (NYSE:ABT)

At the end of the second quarter, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ABT over the last 16 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

No of Hedge Funds with ABT Positions

Among these funds, Diamond Hill Capital held the most valuable stake in Abbott Laboratories (NYSE:ABT), which was worth $547.8 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $182.4 million worth of shares. Moreover, Adage Capital Management, Healthcor Management LP, and Polar Capital were also bullish on Abbott Laboratories (NYSE:ABT), allocating a large percentage of their portfolios to this stock.

Seeing as Abbott Laboratories (NYSE:ABT) has witnessed declining sentiment from hedge fund managers, it's safe to say that there was a specific group of hedgies that decided to sell off their entire stakes heading into Q3. Interestingly, Steve Cohen's Point72 Asset Management dumped the largest position of all the hedgies tracked by Insider Monkey, comprising an estimated $41.2 million in stock. Dmitry Balyasny's fund, Balyasny Asset Management, also dropped its stock, about $37.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q3.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Abbott Laboratories (NYSE:ABT) but similarly valued. These stocks are BHP Group (NYSE:BHP), Adobe Inc. (NASDAQ:ADBE), TOTAL S.A. (NYSE:TOT), and BP plc (NYSE:BP). This group of stocks' market caps are closest to ABT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHP,19,864675,4 ADBE,92,9204800,6 TOT,13,843743,0 BP,29,1246141,0 Average,38.25,3039840,2.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $3040 million. That figure was $1679 million in ABT's case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 13 bullish hedge fund positions. Abbott Laboratories (NYSE:ABT) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ABT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ABT were disappointed as the stock returned -0.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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