"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards The Cooper Companies, Inc. (NYSE:COO) and see how it was affected.
The Cooper Companies, Inc. (NYSE:COO) has seen an increase in support from the world's most elite money managers in recent months. Our calculations also showed that COO 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.
Let's take a glance at the new hedge fund action regarding The Cooper Companies, Inc. (NYSE:COO).
What does the smart money think about The Cooper Companies, Inc. (NYSE:COO)?
At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the fourth quarter of 2018. By comparison, 20 hedge funds held shares or bullish call options in COO a year ago. With the smart money's sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of The Cooper Companies, Inc. (NYSE:COO), with a stake worth $679.7 million reported as of the end of March. Trailing Generation Investment Management was Melvin Capital Management, which amassed a stake valued at $81.4 million. AQR Capital Management, Citadel Investment Group, and Marshall Wace LLP were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Element Capital Management, managed by Jeffrey Talpins, established the most outsized position in The Cooper Companies, Inc. (NYSE:COO). Element Capital Management had $2.9 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $2.9 million position during the quarter. The following funds were also among the new COO investors: John Overdeck and David Siegel's Two Sigma Advisors, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital, and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Cooper Companies, Inc. (NYSE:COO) but similarly valued. These stocks are Mylan N.V. (NASDAQ:MYL), Snap Inc. (NYSE:SNAP), Maxim Integrated Products Inc. (NASDAQ:MXIM), and Nasdaq, Inc. (NASDAQ:NDAQ). This group of stocks' market caps resemble COO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MYL,30,2361904,-12 SNAP,31,1074871,14 MXIM,27,330978,3 NDAQ,16,83129,-5 Average,26,962721,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $963 million. That figure was $1007 million in COO's case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand Nasdaq, Inc. (NASDAQ:NDAQ) is the least popular one with only 16 bullish hedge fund positions. The Cooper Companies, Inc. (NYSE:COO) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately COO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on COO were disappointed as the stock returned -3.3% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.