Abbott Laboratories (ABT): Hedge Funds Are In Wait-and-See Mode

Asma UL Husna
Insider Monkey

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Abbott Laboratories (NYSE:ABT).

Abbott Laboratories (NYSE:ABT) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 62 hedge funds' portfolios at the end of March. At the end of this article we will also compare ABT to other stocks including Chevron Corporation (NYSE:CVX), Eli Lilly and Company (NYSE:LLY), and The Unilever Group (NYSE:UL) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_69704" align="aligncenter" width="397"] Andrew Sandler of Sandler Capital Management[/caption]

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“.  We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to review the key hedge fund action regarding Abbott Laboratories (NYSE:ABT).

What does smart money think about Abbott Laboratories (NYSE:ABT)?

At Q1's end, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ABT over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GQG Partners was the largest shareholder of Abbott Laboratories (NYSE:ABT), with a stake worth $765.8 million reported as of the end of September. Trailing GQG Partners was Diamond Hill Capital, which amassed a stake valued at $498.3 million. Fisher Asset Management, Adage Capital Management, and Citadel Investment Group 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 GQG Partners allocated the biggest weight to Abbott Laboratories (NYSE:ABT), around 5.27% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, setting aside 4.89 percent of its 13F equity portfolio to ABT.

Due to the fact that Abbott Laboratories (NYSE:ABT) has experienced falling interest from the smart money, it's easy to see that there is a sect of hedgies that decided to sell off their entire stakes in the third quarter. At the top of the heap, Samuel Isaly's OrbiMed Advisors dropped the largest stake of the 750 funds watched by Insider Monkey, valued at close to $62.1 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dumped about $37.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to Abbott Laboratories (NYSE:ABT). We will take a look at Chevron Corporation (NYSE:CVX), Eli Lilly and Company (NYSE:LLY), The Unilever Group (NYSE:UL), and SAP SE (NYSE:SAP). This group of stocks' market valuations resemble ABT's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CVX,53,1646070,6 LLY,43,1323452,0 UL,13,207786,-4 SAP,15,1386317,-1 Average,31,1140906,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1141 million. That figure was $2190 million in ABT's case. Chevron Corporation (NYSE:CVX) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Abbott Laboratories (NYSE:ABT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but still managed to beat the market by 15.6 percentage points. Hedge funds were also right about betting on ABT, though not to the same extent, as the stock returned 16.4% in Q2 (through May 22nd) and outperformed the market as well.

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

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