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Are Hedge Funds Starting To Give Up On The Cooper Companies, Inc. (COO)?

Abigail Fisher

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards The Cooper Companies, Inc. (NYSE:COO).

Is The Cooper Companies, Inc. (NYSE:COO) a cheap investment today? Investors who are in the know are in a bearish mood. The number of long hedge fund bets shrunk by 1 lately. Our calculations also showed that COO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). COO was in 27 hedge funds' portfolios at the end of September. There were 28 hedge funds in our database with COO positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26388" align="aligncenter" width="468"] Lee Ainslie of Maverick Capital[/caption]

Lee Ainslie MAVERICK CAPITAL

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a gander at the key hedge fund action encompassing The Cooper Companies, Inc. (NYSE:COO).

What have hedge funds been doing with The Cooper Companies, Inc. (NYSE:COO)?

At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COO over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

COO_dec2019

The largest stake in The Cooper Companies, Inc. (NYSE:COO) was held by Generation Investment Management, which reported holding $453.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $89.2 million position. Other investors bullish on the company included Marshall Wace, Renaissance Technologies, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to The Cooper Companies, Inc. (NYSE:COO), around 3.2% of its portfolio. Axel Capital Management is also relatively very bullish on the stock, earmarking 1.7 percent of its 13F equity portfolio to COO.

Because The Cooper Companies, Inc. (NYSE:COO) has experienced bearish sentiment from the smart money, logic holds that there exists a select few money managers who sold off their full holdings in the third quarter. Intriguingly, Gabriel Plotkin's Melvin Capital Management said goodbye to the largest position of the 750 funds tracked by Insider Monkey, comprising about $33.7 million in stock. Jeffrey Talpins's fund, Element Capital Management, also cut its stock, about $10.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as The Cooper Companies, Inc. (NYSE:COO) but similarly valued. We will take a look at Diamondback Energy Inc (NASDAQ:FANG), NortonLifeLock Inc. (NASDAQ:SYMC), CarMax Inc (NYSE:KMX), and Brookfield Infrastructure Partners L.P. (NYSE:BIP). This group of stocks' market values match COO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FANG,40,1201319,-7 SYMC,38,1527336,3 KMX,41,1886723,2 BIP,7,54208,0 Average,31.5,1167397,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $1167 million. That figure was $742 million in COO's case. CarMax Inc (NYSE:KMX) is the most popular stock in this table. On the other hand Brookfield Infrastructure Partners L.P. (NYSE:BIP) is the least popular one with only 7 bullish hedge fund positions. The Cooper Companies, Inc. (NYSE:COO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately COO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); COO investors were disappointed as the stock returned 5.4% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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