In this article we will check out the progression of hedge fund sentiment towards AmerisourceBergen Corporation (NYSE:ABC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is ABC stock a buy or sell? AmerisourceBergen Corporation (NYSE:ABC) has experienced an increase in enthusiasm from smart money recently. AmerisourceBergen Corporation (NYSE:ABC) was in 47 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ABC isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Andrew Sandler of Sandler Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article).With all of this in mind we're going to analyze the latest hedge fund action encompassing AmerisourceBergen Corporation (NYSE:ABC).
Do Hedge Funds Think ABC Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the third quarter of 2020. By comparison, 40 hedge funds held shares or bullish call options in ABC a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in AmerisourceBergen Corporation (NYSE:ABC) was held by AQR Capital Management, which reported holding $141.7 million worth of stock at the end of December. It was followed by Glenview Capital with a $85.6 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Antipodes Partners. In terms of the portfolio weights assigned to each position HealthInvest Partners AB allocated the biggest weight to AmerisourceBergen Corporation (NYSE:ABC), around 6.02% of its 13F portfolio. MD Sass is also relatively very bullish on the stock, earmarking 5.36 percent of its 13F equity portfolio to ABC.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Sandler Capital Management, managed by Andrew Sandler, initiated the biggest position in AmerisourceBergen Corporation (NYSE:ABC). Sandler Capital Management had $14.2 million invested in the company at the end of the quarter. Anders Hallberg and Carl Bennet's HealthInvest Partners AB also made a $9.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Vishal Saluja and Pham Quang's Endurant Capital Management, Paul Tudor Jones's Tudor Investment Corp, and Parvinder Thiara's Athanor Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as AmerisourceBergen Corporation (NYSE:ABC) but similarly valued. These stocks are EXACT Sciences Corporation (NASDAQ:EXAS), Teradyne, Inc. (NASDAQ:TER), POSCO (NYSE:PKX), Laboratory Corp. of America Holdings (NYSE:LH), Vulcan Materials Company (NYSE:VMC), Fifth Third Bancorp (NASDAQ:FITB), and BioNTech SE (NASDAQ:BNTX). This group of stocks' market valuations resemble ABC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXAS,40,1898594,6 TER,47,1417981,5 PKX,10,130115,-1 LH,66,1873964,9 VMC,44,1337772,2 FITB,43,506319,13 BNTX,17,170450,0 Average,38.1,1047885,4.9 [/table]
As you can see these stocks had an average of 38.1 hedge funds with bullish positions and the average amount invested in these stocks was $1048 million. That figure was $681 million in ABC's case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 10 bullish hedge fund positions. AmerisourceBergen Corporation (NYSE:ABC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ABC is 70. 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 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on ABC as the stock returned 19.1% since the end of Q4 (through 3/19) 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.
