Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Hewlett Packard Enterprise Company (NYSE:HPE) changed recently.
Hewlett Packard Enterprise Company (NYSE:HPE) shareholders have witnessed a decrease in enthusiasm from smart money lately. HPE was in 28 hedge funds' portfolios at the end of the second quarter of 2019. There were 30 hedge funds in our database with HPE positions at the end of the previous quarter. Our calculations also showed that HPE isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_375529" align="aligncenter" width="450"] Mario Gabelli of GAMCO Investors[/caption]
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's review the latest hedge fund action regarding Hewlett Packard Enterprise Company (NYSE:HPE).
Hedge fund activity in Hewlett Packard Enterprise Company (NYSE:HPE)
At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in HPE a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the number one position in Hewlett Packard Enterprise Company (NYSE:HPE). Pzena Investment Management has a $500.6 million position in the stock, comprising 2.6% of its 13F portfolio. On Pzena Investment Management's heels is Citadel Investment Group, managed by Ken Griffin, which holds a $74.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Mario Gabelli's GAMCO Investors, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Noam Gottesman's GLG Partners.
Seeing as Hewlett Packard Enterprise Company (NYSE:HPE) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers that decided to sell off their positions entirely last quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group said goodbye to the largest stake of the "upper crust" of funds tracked by Insider Monkey, totaling about $13 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund dumped about $5.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Hewlett Packard Enterprise Company (NYSE:HPE) but similarly valued. These stocks are Chipotle Mexican Grill, Inc. (NYSE:CMG), Synopsys, Inc. (NASDAQ:SNPS), Northern Trust Corporation (NASDAQ:NTRS), and Expedia Group, Inc. (NASDAQ:EXPE). This group of stocks' market values are similar to HPE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMG,37,3383462,2 SNPS,42,1551375,11 NTRS,29,443983,-5 EXPE,33,2556290,1 Average,35.25,1983778,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.25 hedge funds with bullish positions and the average amount invested in these stocks was $1984 million. That figure was $837 million in HPE's case. Synopsys, Inc. (NASDAQ:SNPS) is the most popular stock in this table. On the other hand Northern Trust Corporation (NASDAQ:NTRS) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Hewlett Packard Enterprise Company (NYSE:HPE) is even less popular than NTRS. Our calculations showed that top 20 most popular stocks (see the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on HPE, though not to the same extent, as the stock returned 2.2% during the third quarter and outperformed the market as well. 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.