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We follow hedge fund managers because they're the smartest investors around. They leave less to chance than do most investors. They go to great lengths to get an “edge” over ordinary investors. Hedge fund managers also have the resources to do extensive research on public companies and they have access to experts who can guide them. We believe we are more likely to beat the market by imitating insiders and hedge funds than trading against them. Based on the transactions of nearly 350 hedge funds we compile, here is the list of top 10 drug stocks that hedge funds are buying like crazy:

1. Pfizer (NYSE:PFE): More hedge funds - in fact, 75 - owned Pfizer at the end of June than any other drug stock. PFE fared pretty well over the past year, returning 21% over the past 52 weeks. David Einhorn's Greenlight Capital owns the most with 23 million shares. Ken Fisher, Lee Ainslie and David Tepper all also have large positions with Pfizer (see David Tepper’s top stock picks).

2. Sanofi Aventis (NYSE:SNY): Sixty-four hedge funds had SNY at the end of the second quarter in their portfolios. They would have fared well if they had more confidence, seeing how Sanofi advanced a whopping 36% over the past year. Ken Fisher's Fisher Asset Management has far and away more shares than any other fund, with over 14 million. Up second comes Warren Buffett's Berkshire Hathaway, which has just over 4 million shares as of the end of June (check out Warren Buffett’s favorite stocks).

3. Johnson & Johnson (NYSE:JNJ): Fifty-seven hedge funds had an interest in JNJ at the end of the second quarter. Johnson & Johnson did ok over the past year, returning 17%. Berkshire comes out on top here, with more than 42 million shares. Clint Carlson initiated a small position in the second quarter, at about a quarter million shares.

4. Merck (NYSE:MRK): Forty stocks had Merck in their portfolios. Among the drug stocks, MRK was the lone stock on the losing side in terms of return. It lost 2% over the past 52 weeks, as the S&P 500 (NYSEARCA:SPY) advanced 14.14%. D.E. Shaw more than doubled its investment in Merck in Q2; it now has 1.8 million shares.

5. Abbott Laboratories (NYSE:ABT): Thirty-nine hedge funds owned Abbott at the end of June. Abbott advanced 7% over the most recent 52 weeks. Jim Simons' Renaissance Technologies boosted its stake last quarter by a whopping 4374%. But its total position of about 912 K shares still pales next to Fisher Asset Management's 9.3 million position.

6. Bristol Myers Squibb (NYSE:BMY): BNY fared pretty well, beating the S&P and advancing 17% over the past year. Thirty-three hedge funds benefited from that advance as of the end of June. Jim Simons' Renaissance Technologies owns the most - 7.1 million shares - that's after the 53% increase it had in Q2 (see billionaire Jim Simons’ new stock picks).

7. Eli Lilly (NYSE:LLY): Twenty-nine funds had LLY in their portfolios in the second quarter. LLY advanced 13% this past year. Renaissance is again at the top here with a wide margin. It has 10.3 million shares, and that's after the 59% boost from Q2. The hedge fund with the next highest amount is Karsch Capital Management with 1.5 million shares.

8. Novartis (NYSE:NVS): NVS beat the S&P and advanced 20% this past year. Twenty hedge funds had Novartis in their portfolios in Q2. Several hedge funds initiated positions in this stock last quarter. Renaissance - have to mention them again because they're at the top - initiated the most with more than 2 million shares. Cliff Asness's AQR Capital Management and Clint Carlson's Carlson Capital also initiated positions.

9. Impax Labs (NASDAQ:IPXL): Seventeen hedge funds had Impax Labs in their portfolios in the second quarter. Impax didn't let them down; it's gone up 13% over the past year. That's still below the S&P however, which advanced more than 14% over the same time period. SAC Capital Advisors clearly sees this going somewhere. It boosted its stake nearly 4000%. As of the end of June, it had more than 540K shares.

10. Anthera (NASDAQ:ANTH): Just 14 funds had an interest in Anthera in the second quarter. Anthera is quite small, with a market cap of 248 Million. ANTH shot up over the past year. It advanced a whopping 58%. Roberto Mignone initiated a position in Anthera last quarter. Bridger Management now has 1.3 Million shares of the company.

As a group, drug companies heavily outperformed the S&P. Over the past 52 weeks, the S&P returned just above 14%, whereas these 10 stocks averaged a 20% return, heavily carried by Anthera and Sanofi Aventis.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.