Was The Smart Money Right About Abbott Laboratories (ABT)?

Debasis Saha
·6 min read

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Abbott Laboratories (NYSE:ABT).

Is Abbott Laboratories (NYSE:ABT) an outstanding investment today? Hedge funds were getting more optimistic. The number of long hedge fund positions increased by 2 lately. Abbott Laboratories (NYSE:ABT) was in 64 hedge funds' portfolios at the end of December. The all time high for this statistic is 67. Our calculations also showed that ABT isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 62 hedge funds in our database with ABT holdings at the end of September.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. 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. Keeping this in mind let's take a look at the fresh hedge fund action surrounding Abbott Laboratories (NYSE:ABT).

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

At fourth quarter's end, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ABT over the last 22 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is ABT A Good Stock To Buy?
Is ABT A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Rajiv Jain's GQG Partners has the most valuable position in Abbott Laboratories (NYSE:ABT), worth close to $1.5636 billion, accounting for 5.4% of its total 13F portfolio. The second most bullish fund manager is Fisher Asset Management, managed by Ken Fisher, which holds a $819.6 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass Ric Dillon's Diamond Hill Capital, Phill Gross and Robert Atchinson's Adage Capital Management and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position GQG Partners allocated the biggest weight to Abbott Laboratories (NYSE:ABT), around 5.36% of its 13F portfolio. Coe Capital Management is also relatively very bullish on the stock, setting aside 3.58 percent of its 13F equity portfolio to ABT.

As industrywide interest jumped, some big names were breaking ground themselves. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the most outsized position in Abbott Laboratories (NYSE:ABT). Tudor Investment Corp had $7.3 million invested in the company at the end of the quarter. Mark R. Freeman's Socorro Asset Management also initiated a $4.2 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, Matthew Tewksbury's Stevens Capital Management, and Alex von Furstenberg and Mal Serure's Arrow Capital Management.

Let's now take a look at hedge fund activity in other stocks similar to Abbott Laboratories (NYSE:ABT). We will take a look at Oracle Corporation (NASDAQ:ORCL), AbbVie Inc (NYSE:ABBV), Cisco Systems, Inc. (NASDAQ:CSCO), Thermo Fisher Scientific Inc. (NYSE:TMO), Broadcom Inc (NASDAQ:AVGO), Exxon Mobil Corporation (NYSE:XOM), and Accenture Plc (NYSE:ACN). This group of stocks' market values match ABT's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ORCL,52,2450210,-4 ABBV,83,6965013,1 CSCO,60,4974309,1 TMO,89,5470797,9 AVGO,59,3342445,0 XOM,63,2208617,11 ACN,50,2133706,4 Average,65.1,3935014,3.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 65.1 hedge funds with bullish positions and the average amount invested in these stocks was $3935 million. That figure was $4303 million in ABT's case. Thermo Fisher Scientific Inc. (NYSE:TMO) 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. Abbott Laboratories (NYSE:ABT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABT is 53.6. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately ABT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ABT investors were disappointed as the stock returned 10.5% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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