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Were Hedge Funds Right About AbbVie Inc (ABBV)?

·5 min read

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought AbbVie Inc (NYSE:ABBV) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

AbbVie Inc (NYSE:ABBV) was in 81 hedge funds' portfolios at the end of September. The all time high for this statistic is 89. ABBV has seen a decrease in activity from the world's largest hedge funds recently. There were 82 hedge funds in our database with ABBV holdings at the end of June. Our calculations also showed that ABBV ranked #30 among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let's review the recent hedge fund action regarding AbbVie Inc (NYSE:ABBV).

William Gray Orbis Investment Management
William Gray Orbis Investment Management

William Gray of Orbis Investment Management

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

At the end of September, a total of 81 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -1% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ABBV over the last 25 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Among these funds, Berkshire Hathaway held the most valuable stake in AbbVie Inc (NYSE:ABBV), which was worth $1553.2 million at the end of the third quarter. On the second spot was Orbis Investment Management which amassed $324.3 million worth of shares. Citadel Investment Group, Renaissance Technologies, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Iron Triangle Partners allocated the biggest weight to AbbVie Inc (NYSE:ABBV), around 6.08% of its 13F portfolio. Sphera Global Healthcare Fund is also relatively very bullish on the stock, designating 5.4 percent of its 13F equity portfolio to ABBV.

Seeing as AbbVie Inc (NYSE:ABBV) has faced falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of fund managers who sold off their full holdings by the end of the third quarter. Intriguingly, Matthew Stadelman's Diamond Hill Capital dropped the largest stake of the 750 funds followed by Insider Monkey, worth close to $260.5 million in call options. Mike Masters's fund, Masters Capital Management, also dropped its call options, about $112.6 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as AbbVie Inc (NYSE:ABBV) but similarly valued. We will take a look at Wells Fargo & Company (NYSE:WFC), Merck & Co., Inc. (NYSE:MRK), AstraZeneca plc (NASDAQ:AZN), Novartis AG (NYSE:NVS), McDonald's Corporation (NYSE:MCD), Morgan Stanley (NYSE:MS), and Texas Instruments Incorporated (NASDAQ:TXN). All of these stocks' market caps resemble ABBV's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WFC,88,6188279,-6 MRK,77,4550626,-2 AZN,41,3757394,4 NVS,22,1439973,0 MCD,58,3339098,-8 MS,65,4990950,-4 TXN,40,1938965,-10 Average,55.9,3743612,-3.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 55.9 hedge funds with bullish positions and the average amount invested in these stocks was $3744 million. That figure was $4140 million in ABBV's case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 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 76. 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 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on ABBV as the stock returned 29.8% since the end of Q3 (through 1/31) 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.