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Were Hedge Funds Right About AbbVie (ABBV)?

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·6 min read
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In this article we will take a look at whether hedge funds think AbbVie Inc (NYSE:ABBV) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is AbbVie Inc (NYSE:ABBV) a buy right now? Prominent investors were in an optimistic mood. The number of bullish hedge fund positions rose by 1 lately. AbbVie Inc (NYSE:ABBV) was in 83 hedge funds' portfolios at the end of December. The all time high for this statistic is 89. Our calculations also showed that ABBV isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 82 hedge funds in our database with ABBV holdings at the end of September.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Rajiv Jain of GQG Partners
Rajiv Jain of GQG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind let's take a glance at the new hedge fund action encompassing AbbVie Inc (NYSE:ABBV).

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

At the end of the fourth quarter, a total of 83 of the hedge funds tracked by Insider Monkey were long this stock, a change of 1% from the previous quarter. By comparison, 71 hedge funds held shares or bullish call options in ABBV a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ABBV A Good Stock To Buy?
Is ABBV A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Warren Buffett's Berkshire Hathaway has the most valuable position in AbbVie Inc (NYSE:ABBV), worth close to $2.7359 billion, corresponding to 1% of its total 13F portfolio. The second most bullish fund manager is Orbis Investment Management, led by William B. Gray, holding a $877 million position; the fund has 6.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Renaissance Technologies, John Overdeck and David Siegel's Two Sigma Advisors and Rajiv Jain's GQG Partners. In terms of the portfolio weights assigned to each position Healthcare Value Capital allocated the biggest weight to AbbVie Inc (NYSE:ABBV), around 12.63% of its 13F portfolio. Copernicus Capital Management is also relatively very bullish on the stock, dishing out 7.81 percent of its 13F equity portfolio to ABBV.

As industrywide interest jumped, some big names were breaking ground themselves. GQG Partners, managed by Rajiv Jain, established the most outsized position in AbbVie Inc (NYSE:ABBV). GQG Partners had $344.8 million invested in the company at the end of the quarter. Jeremy Green's Redmile Group also made a $148.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeffrey Tannenbaum's Fir Tree, Prashanth Jayaram's Tri Locum Partners, and Benjamin A. Smith's Laurion Capital Management.

Let's also examine hedge fund activity in other stocks similar to AbbVie Inc (NYSE:ABBV). We will take a look at Cisco Systems, Inc. (NASDAQ:CSCO), Thermo Fisher Scientific Inc. (NYSE:TMO), Broadcom Inc (NASDAQ:AVGO), Exxon Mobil Corporation (NYSE:XOM), Accenture Plc (NYSE:ACN), QUALCOMM, Incorporated (NASDAQ:QCOM), and T-Mobile US, Inc. (NYSE:TMUS). All of these stocks' market caps match ABBV's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSCO,60,4974309,1 TMO,89,5470797,9 AVGO,59,3342445,0 XOM,63,2208617,11 ACN,50,2133706,4 QCOM,85,2727547,-2 TMUS,103,9117019,9 Average,72.7,4282063,4.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 72.7 hedge funds with bullish positions and the average amount invested in these stocks was $4282 million. That figure was $6965 million in ABBV's case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand Accenture Plc (NYSE:ACN) is the least popular one with only 50 bullish hedge fund positions. AbbVie Inc (NYSE:ABBV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABBV is 65.1. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately ABBV wasn't nearly as popular as these 30 stocks and hedge funds that were betting on ABBV were disappointed as the stock returned 3.8% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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