We at Insider Monkey have gone over 730 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of June 28th. In this article, we look at what those funds think of HP Inc. (NYSE:HPQ) based on that data.
HP Inc. (NYSE:HPQ) has seen a decrease in activity from the world's largest hedge funds in recent months. HPQ was in 32 hedge funds' portfolios at the end of June. There were 35 hedge funds in our database with HPQ positions at the end of the previous quarter. Our calculations also showed that HPQ isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 go over the latest hedge fund action regarding HP Inc. (NYSE:HPQ).
What does smart money think about HP Inc. (NYSE:HPQ)?
Heading into the third quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HPQ over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in HP Inc. (NYSE:HPQ) was held by AQR Capital Management, which reported holding $355.5 million worth of stock at the end of March. It was followed by D E Shaw with a $115.8 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and Adage Capital Management.
Since HP Inc. (NYSE:HPQ) has witnessed falling interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of fund managers who sold off their entire stakes by the end of the second quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, worth about $21 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund dropped about $11.1 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds by the end of the second quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as HP Inc. (NYSE:HPQ) but similarly valued. We will take a look at Canadian Natural Resources Limited (NYSE:CNQ), Newmont Goldcorp Corporation (NYSE:NEM), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), and Canon Inc. (NYSE:CAJ). All of these stocks' market caps are closest to HPQ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNQ,24,424540,-5 NEM,41,777802,6 ERIC,19,415250,-1 CAJ,6,87599,-1 Average,22.5,426298,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $426 million. That figure was $870 million in HPQ's case. Newmont Mining Corp (NYSE:NEM) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 6 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -8.2% during the third quarter 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.
Disclosure: None. This article was originally published at Insider Monkey.