To say that hedge fund and mutual fund managers tend to follow the herd is an incredible understatement and always has been. While publicly they sometimes seem reticent to discuss their holdings, especially stocks they are short sellers of, the reality is managers tend to talk among themselves as they run in the same circles. Often those discussions are centered around their portfolios and what is in them.
Health care is one sector that continues to draw a ton of fund manager interest, and with good reason. In the frothy and seemingly full-valued market we have now, the S&P 500 is just 75 points shy of an all-time high again. So, we are looking to see what the large-cap fund managers own now at this elevated level.
A new RBC report examines the holdings of mutual fund and hedge fund managers across Wall Street. Today we look at the health care stocks that are favored in the ‘Lions of Large Cap” silo, which has most popular stocks across all large-cap fund style groups.
In addition, we screened our 24/7 Wall St. research universe database looking for firms that have Buy ratings on the stocks. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
AbbVie
This is one of the top pharmaceutical stocks picks across Wall Street, and 34% of the fund managers own the shares. AbbVie Inc. (NYSE: ABBV) is a global, research-based biopharmaceutical company formed in 2013 following separation from Abbott Laboratories. The company develops and markets drugs in areas such as immunology, virology, renal disease, dyslipidemia and neuroscience.
One of the biggest concerns with AbbVie is what might happen eventually with anti-inflammatory therapy Humira, which has some of the largest sales for a drug ever recorded. The company was concerned, so in June of 2019 it announced that it has agreed to pay $63 billion for rival drugmaker Allergan, the latest merger in an industry in which some of the biggest companies have been willing to pay a high price to resolve questions about their future growth. The purchase officially closed in May of this year.
AbbVie may be nearing the limits of how far it can boost Humira’s price as cheaper competitors come to market, a problem Allergan is already grappling with as more alternatives to Botox emerge.
Shareholders receive a 5.37% dividend. Morgan Stanley has a $108 price target on the shares. The Wall Street consensus price target is at $109.12, but AbbVie stock closed trading at $87.83 on Tuesday.
Bristol-Myers Squibb
This remains a solid pharmaceutical stock to own long-term, and 33% of the fund managers are long the shares. Bristol-Myers Squibb Co. (NYSE: BMY) is a global pharmaceutical company focused on discovering, developing, licensing and marketing chemically synthesized drugs or small molecules and biologics in various therapeutic areas, including virology comprising human immunodeficiency virus infection (HIV), oncology, neuroscience, immunoscience and cardiovascular.
The company reported strong second-quarter results that were largely ahead of Wall Street consensus, given the ongoing recognition of Celgene revenue. Bristol-Myers bought Celgene last year in a massive $74 billion acquisition. The posted quarterly earnings of $1.63 per share exceeded the Wall Street consensus estimate and were higher than the per-share earnings reported in the same period a year ago. Third-quarter results are due on November 5.
The dividend yield is 2.96%. The BofA Securities price target is $80, while the consensus target is $73.69. Bristol-Myers stock closed Tuesday at $61.13.
Johnson & Johnson
With a diverse product base and a very popular and solid brand, this is among the most conservative big pharmaceutical plays, and 44% of fund managers own the stock. Johnson & Johnson (NYSE: JNJ) is one of the top market cap stocks in the health care sector and raised its dividend this year for the 56th consecutive year. With everything from medical devices to over the counter health items and prescription drugs, the company remains one of the most diversified health care names on Wall Street.
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