Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Anthem Inc (NYSE:ANTM).
Is Anthem Inc (NYSE:ANTM) ready to rally soon? Hedge funds are taking a pessimistic view. The number of long hedge fund positions fell by 7 lately. Our calculations also showed that ANTM isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article). ANTM was in 66 hedge funds' portfolios at the end of the second quarter of 2019. There were 73 hedge funds in our database with ANTM holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? 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.
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 go over the latest hedge fund action encompassing Anthem Inc (NYSE:ANTM).
What does smart money think about Anthem Inc (NYSE:ANTM)?
At the end of the second quarter, a total of 66 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 51 hedge funds with a bullish position in ANTM a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Viking Global held the most valuable stake in Anthem Inc (NYSE:ANTM), which was worth $1466.9 million at the end of the second quarter. On the second spot was Orbis Investment Management which amassed $601.5 million worth of shares. Moreover, AQR Capital Management, Farallon Capital, and Iridian Asset Management were also bullish on Anthem Inc (NYSE:ANTM), allocating a large percentage of their portfolios to this stock.
Because Anthem Inc (NYSE:ANTM) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few money managers that decided to sell off their positions entirely in the second quarter. It's worth mentioning that Lee Ainslie's Maverick Capital said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, worth about $207.8 million in stock, and John Armitage's Egerton Capital Limited was right behind this move, as the fund said goodbye to about $199.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 7 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Anthem Inc (NYSE:ANTM). We will take a look at CME Group Inc (NASDAQ:CME), CVS Health Corporation (NYSE:CVS), Automatic Data Processing, Inc. (NASDAQ:ADP), and VMware, Inc. (NYSE:VMW). This group of stocks' market valuations are similar to ANTM's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CME,39,1663130,-3 CVS,55,985752,-6 ADP,43,2736833,4 VMW,34,1324960,2 Average,42.75,1677669,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $1678 million. That figure was $4919 million in ANTM's case. CVS Health Corporation (NYSE:CVS) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks Anthem Inc (NYSE:ANTM) 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. Unfortunately ANTM wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ANTM were disappointed as the stock returned -14.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.