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Were Hedge Funds Right About Deserting Walgreens Boots Alliance Inc (WBA)?

·6 分鐘文章

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Walgreens Boots Alliance Inc (NASDAQ:WBA).

Walgreens Boots Alliance Inc (NASDAQ:WBA) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 41 hedge funds' portfolios at the end of the second quarter of 2021. Our calculations also showed that WBA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as National Grid plc (NYSE:NGG), Koninklijke Philips NV (NYSE:PHG), and Lloyds Banking Group PLC (NYSE:LYG) to gather more data points.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

10 best stocks according to billionaire Larry Robbins
10 best stocks according to billionaire Larry Robbins

Larry Robbins of Glenview Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 we're going to take a look at the recent hedge fund action regarding Walgreens Boots Alliance Inc (NASDAQ:WBA).

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

At the end of June, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards WBA over the last 24 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

More specifically, Camber Capital Management was the largest shareholder of Walgreens Boots Alliance Inc (NASDAQ:WBA), with a stake worth $184.1 million reported as of the end of June. Trailing Camber Capital Management was Antipodes Partners, which amassed a stake valued at $136.2 million. Glenview Capital, Viking Global, and Eminence Capital 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 Camber Capital Management allocated the biggest weight to Walgreens Boots Alliance Inc (NASDAQ:WBA), around 6.2% of its 13F portfolio. Antipodes Partners is also relatively very bullish on the stock, earmarking 4.91 percent of its 13F equity portfolio to WBA.

Judging by the fact that Walgreens Boots Alliance Inc (NASDAQ:WBA) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of money managers that slashed their positions entirely by the end of the second quarter. Interestingly, Prashanth Jayaram's Tri Locum Partners dropped the largest investment of the "upper crust" of funds watched by Insider Monkey, worth an estimated $22 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund dumped about $21.5 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Walgreens Boots Alliance Inc (NASDAQ:WBA) but similarly valued. We will take a look at National Grid plc (NYSE:NGG), Koninklijke Philips NV (NYSE:PHG), Lloyds Banking Group PLC (NYSE:LYG), Kimberly Clark Corporation (NYSE:KMB), Constellation Brands, Inc. (NYSE:STZ), T. Rowe Price Group, Inc. (NASDAQ:TROW), and IHS Markit Ltd. (NYSE:INFO). All of these stocks' market caps resemble WBA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NGG,7,352045,-2 PHG,10,122622,-1 LYG,8,16299,3 KMB,37,903375,6 STZ,50,1607881,-8 TROW,24,407032,-2 INFO,61,5947551,7 Average,28.1,1336686,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $1337 million. That figure was $1113 million in WBA's case. IHS Markit Ltd. (NYSE:INFO) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 7 bullish hedge fund positions. Walgreens Boots Alliance Inc (NASDAQ:WBA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WBA is 50. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately WBA wasn't nearly as popular as these 5 stocks and hedge funds that were betting on WBA were disappointed as the stock returned -3.6% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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