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Were Hedge Funds Right About Snapping Up AbbVie Inc (ABBV)?

Nina Todic

We can judge whether AbbVie Inc (NYSE:ABBV) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

AbbVie Inc (NYSE:ABBV) was in 55 hedge funds' portfolios at the end of the second quarter of 2019. ABBV has seen an increase in enthusiasm from smart money in recent months. There were 47 hedge funds in our database with ABBV positions at the end of the previous quarter. Our calculations also showed that ABBV isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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.

D. E. Shaw

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 check out the recent hedge fund action surrounding AbbVie Inc (NYSE:ABBV).

What does smart money think about AbbVie Inc (NYSE:ABBV)?

At Q2's end, a total of 55 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ABBV over the last 16 quarters. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

No of Hedge Funds with ABBV Positions

Among these funds, Orbis Investment Management held the most valuable stake in AbbVie Inc (NYSE:ABBV), which was worth $1248.5 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $538.1 million worth of shares. Moreover, D E Shaw, Two Sigma Advisors, and Renaissance Technologies were also bullish on AbbVie Inc (NYSE:ABBV), allocating a large percentage of their portfolios to this stock.

Consequently, some big names have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most outsized position in AbbVie Inc (NYSE:ABBV). Adage Capital Management had $101.9 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $87.6 million position during the quarter. The following funds were also among the new ABBV investors: Benjamin A. Smith's Laurion Capital Management, Samuel Isaly's OrbiMed Advisors, and Michael Kharitonov and Jon David McAuliffe's Voleon Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as AbbVie Inc (NYSE:ABBV) but similarly valued. These stocks are Sanofi (NASDAQ:SNY), AstraZeneca plc (NYSE:AZN), Texas Instruments Incorporated (NASDAQ:TXN), and Rio Tinto Group (NYSE:RIO). This group of 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 SNY,25,914861,-1 AZN,24,1602389,-4 TXN,43,2046831,0 RIO,24,1913982,2 Average,29,1619516,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1620 million. That figure was $4126 million in ABBV's case. Texas Instruments Incorporated (NASDAQ:TXN) is the most popular stock in this table. On the other hand AstraZeneca plc (NYSE:AZN) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks AbbVie Inc (NYSE:ABBV) is more popular among hedge funds. 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. Hedge funds were also right about betting on ABBV, though not to the same extent, as the stock returned 5.7% during the third quarter and outperformed the market as well. 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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