Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.1% in 2019 (through December 23) and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards HP Inc. (NYSE:HPQ) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.
Is HP Inc. (NYSE:HPQ) a buy right now? Prominent investors are becoming hopeful. The number of long hedge fund positions inched up by 6 lately. Our calculations also showed that HPQ isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). HPQ was in 38 hedge funds' portfolios at the end of the third quarter of 2019. There were 32 hedge funds in our database with HPQ positions at the end of the previous quarter.
To most stock holders, hedge funds are viewed as worthless, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at the moment, Our researchers look at the elite of this group, about 750 funds. It is estimated that this group of investors handle bulk of the smart money's total asset base, and by shadowing their first-class investments, Insider Monkey has come up with several investment strategies that have historically defeated Mr. Market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_673876" align="aligncenter" width="473"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a look at the key hedge fund action encompassing HP Inc. (NYSE:HPQ).
How are hedge funds trading HP Inc. (NYSE:HPQ)?
At Q3's end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HPQ over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Carl Icahn's Icahn Capital has the largest position in HP Inc. (NYSE:HPQ), worth close to $1.1901 billion, amounting to 4.6% of its total 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $347.5 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish contain David E. Shaw's D E Shaw, Ken Griffin's Citadel Investment Group and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Icahn Capital allocated the biggest weight to HP Inc. (NYSE:HPQ), around 4.63% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, setting aside 1.85 percent of its 13F equity portfolio to HPQ.
As one would reasonably expect, key hedge funds have jumped into HP Inc. (NYSE:HPQ) headfirst. Icahn Capital, managed by Carl Icahn, assembled the largest position in HP Inc. (NYSE:HPQ). Icahn Capital had $1.1901 billion invested in the company at the end of the quarter. Renaissance Technologies also initiated a $25.3 million position during the quarter. The following funds were also among the new HPQ investors: Paul Marshall and Ian Wace's Marshall Wace, Paul Tudor Jones's Tudor Investment Corp, and Brandon Haley's Holocene Advisors.
Let's now review hedge fund activity in other stocks similar to HP Inc. (NYSE:HPQ). These stocks are PPG Industries, Inc. (NYSE:PPG), Sirius XM Holdings Inc (NASDAQ:SIRI), TransDigm Group Incorporated (NYSE:TDG), and Republic Services, Inc. (NYSE:RSG). This group of stocks' market values are similar to HPQ's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PPG,27,421872,0 SIRI,33,1274312,4 TDG,56,5183262,8 RSG,31,625488,7 Average,36.75,1876234,4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.75 hedge funds with bullish positions and the average amount invested in these stocks was $1876 million. That figure was $2031 million in HPQ's case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand PPG Industries, Inc. (NYSE:PPG) is the least popular one with only 27 bullish hedge fund positions. HP Inc. (NYSE:HPQ) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately HPQ wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HPQ were disappointed as the stock returned 3.9% in 2019 (through December 23rd) 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 so far this year. 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.