Billionaire Ken Griffin Just Loaded Up on Eli Lilly Stock. Should You?
Key Points
Griffin's Citadel hedge fund nearly quadrupled its stake in Eli Lilly in Q2.
Lilly's diabetes and obesity drugs continue to enjoy impressive momentum.
However, investors can't buy the pharma stock now as cheaply as Griffin did.
It's easy for a stock to get lost in the crowd when a portfolio has an enormous number of holdings. Citadel Advisors, the hedge fund founded and led by billionaire Ken Griffin, owns nearly 7,500 stocks and thousands of options, according to its latest 13F filing.
However, a few stocks still stand out with Citadel's second-quarter activity. For example, Griffin especially loaded up on Eli Lilly (NYSE: LLY) in Q2. Should you follow his lead?
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Citadel founder and CEO Ken Griffin. Image source: Getty Images.
A big buy of a big pharma stock
Griffin nearly quadrupled Citadel's stake in Lilly during Q2 with his purchase of around 704,000 additional shares. The big pharma stock is now the hedge fund's sixth-largest position. Because Citadel holds so many holdings, though, Lilly still accounts for only 0.65% of the total portfolio.
It isn't hard to guess why Griffin likes Lilly. The company's revenue continues to soar, driven largely by the phenomenal success of its tirzepatide franchise, which includes type 2 diabetes drug Mounjaro and weight loss drug Zepbound. Mounjaro and Zepbound are on track to generate combined sales of over $55 billion this year.
Lilly's daily GLP-1 weight-loss pill, Foundayo, is off to a decent start after receiving U.S. regulatory approval in April. Wall Street expects the oral therapy to rake in around $1.5 billion in sales this year and eventually hit peak annual sales of $26 billion.
We don't know exactly when Griffin bought additional shares of Lilly. However, the stock was down roughly 21% year-to-date as of late April. I suspect the billionaire jumped on the opportunity to buy on the dip early in Q2.
Is Lilly stock a good pick now?
It isn't wise to buy any stock solely because a famous investor bought it -- even when the investor is as legendary as Griffin. Importantly, you can't scoop up Lilly's shares as cheaply as he did: The stock is up around 18% since the end of Q2 (and perhaps even more since Griffin added to his stake in Lilly).
Valuation could be a concern for some investors. Lilly's shares trade at 35 times forward earnings.
However, I think the stock remains a good pick. Sales for Mounjaro, Zepbound, and Foundayo should continue to grow strongly. Lilly hopes to file for approval of another promising weight loss drug, retatrutide, in the first quarter of 2027. The company also has several products with solid momentum outside of its diabetes-obesity franchise.
I don't expect Lilly's stock to climb nearly 370% over the next five years as it did over the last five years. But it could continue to beat the market and be a winner for investors.
Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.