World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
To most market participants, hedge funds are seen as slow, old investment tools of years past. While there are greater than 8000 funds in operation at present, Our researchers look at the upper echelon of this group, approximately 750 funds. These hedge fund managers manage most of the smart money's total capital, and by keeping track of their unrivaled picks, Insider Monkey has formulated a few investment strategies that have historically outpaced the S&P 500 index. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
[caption id="attachment_735677" align="aligncenter" width="473"] Sander Gerber of Hudson Bay Capital[/caption]
Let's view the fresh hedge fund action encompassing HCP, Inc. (NYSE:HCP).
What have hedge funds been doing with HCP, Inc. (NYSE:HCP)?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards HCP over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Zimmer Partners held the most valuable stake in HCP, Inc. (NYSE:HCP), which was worth $194.8 million at the end of the first quarter. On the second spot was AEW Capital Management which amassed $152.5 million worth of shares. Moreover, Citadel Investment Group, D E Shaw, and Hudson Bay Capital Management were also bullish on HCP, Inc. (NYSE:HCP), allocating a large percentage of their portfolios to this stock.
Seeing as HCP, Inc. (NYSE:HCP) has witnessed a decline in interest from the smart money, it's safe to say that there is a sect of hedge funds who sold off their full holdings last quarter. Interestingly, Jasjit Rekhi's Sanoor Capital cut the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising about $7.7 million in stock. Richard Driehaus's fund, Driehaus Capital, also said goodbye to its stock, about $7.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's now review hedge fund activity in other stocks similar to HCP, Inc. (NYSE:HCP). We will take a look at Loews Corporation (NYSE:L), Canopy Growth Corporation (NYSE:CGC), ResMed Inc. (NYSE:RMD), and DISH Network Corp. (NASDAQ:DISH). All of these stocks' market caps are similar to HCP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position L,20,235814,-1 CGC,6,72973,1 RMD,18,147376,-4 DISH,27,1305780,-10 Average,17.75,440486,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $440 million. That figure was $661 million in HCP's case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NYSE:CGC) is the least popular one with only 6 bullish hedge fund positions. HCP, Inc. (NYSE:HCP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on HCP, though not to the same extent, as the stock returned 1.5% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.