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Were Hedge Funds Right About Abbott Laboratories (ABT)?

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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Abbott Laboratories (NYSE:ABT) to find out whether there were any major changes in hedge funds' views.

Abbott Laboratories (NYSE:ABT) was in 65 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 67. ABT investors should pay attention to an increase in hedge fund interest recently. There were 64 hedge funds in our database with ABT holdings at the end of December. Our calculations also showed that ABT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the 21st century investor’s toolkit there are several tools market participants put to use to assess their stock investments. Some of the most under-the-radar tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the best fund managers can outclass their index-focused peers by a superb amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Rajiv Jain of GQG Partners
Rajiv Jain of GQG Partners

Rajiv Jain of GQG Partners

At Insider Monkey, we scour multiple sources to uncover 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 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. 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 let's go over the fresh hedge fund action encompassing Abbott Laboratories (NYSE:ABT).

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

At the end of the first quarter, a total of 65 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the fourth quarter of 2020. On the other hand, there were a total of 62 hedge funds with a bullish position in ABT a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

The largest stake in Abbott Laboratories (NYSE:ABT) was held by GQG Partners, which reported holding $1537.7 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $932.8 million position. Other investors bullish on the company included Diamond Hill Capital, AQR Capital Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position GQG Partners allocated the biggest weight to Abbott Laboratories (NYSE:ABT), around 5.62% of its 13F portfolio. Sustainable Insight Capital Management is also relatively very bullish on the stock, setting aside 5.09 percent of its 13F equity portfolio to ABT.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Steadfast Capital Management, managed by Robert Pitts, created the largest position in Abbott Laboratories (NYSE:ABT). Steadfast Capital Management had $158.7 million invested in the company at the end of the quarter. Daniel S. Och's OZ Management also made a $148.1 million investment in the stock during the quarter. The following funds were also among the new ABT investors: Tim Hurd and Ed Magnus's BlueSpruce Investments, Renaissance Technologies, and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's check out hedge fund activity in other stocks similar to Abbott Laboratories (NYSE:ABT). These stocks are NIKE, Inc. (NYSE:NKE), Oracle Corporation (NYSE:ORCL), Pfizer Inc. (NYSE:PFE), Chevron Corporation (NYSE:CVX), PepsiCo, Inc. (NASDAQ:PEP), salesforce.com, inc. (NYSE:CRM), and Merck & Co., Inc. (NYSE:MRK). This group of stocks' market values resemble ABT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NKE,78,5176711,-4 ORCL,52,2888444,0 PFE,65,2014186,2 CVX,41,4866758,-9 PEP,61,4882404,5 CRM,91,8837040,-6 MRK,79,6494373,-3 Average,66.7,5022845,-2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 66.7 hedge funds with bullish positions and the average amount invested in these stocks was $5023 million. That figure was $5137 million in ABT's case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Chevron Corporation (NYSE:CVX) is the least popular one with only 41 bullish hedge fund positions. Abbott Laboratories (NYSE:ABT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABT is 59.1. 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 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 25.8% in 2021 through August 6th and surpassed the market again by 6.7 percentage points. Unfortunately ABT wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ABT investors were disappointed as the stock returned 2.7% since the end of March (through 8/6) 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 most of these stocks already outperformed the market in 2021.

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