We can judge whether HCP, Inc. (NYSE:HCP) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is HCP, Inc. (NYSE:HCP) a buy, sell, or hold? The best stock pickers are becoming hopeful. The number of bullish hedge fund bets went up by 3 recently. Our calculations also showed that HCP isn't among the 30 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 market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a gander at the fresh hedge fund action regarding HCP, Inc. (NYSE:HCP).
How have hedgies been trading HCP, Inc. (NYSE:HCP)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HCP over the last 14 quarters. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Zimmer Partners was the largest shareholder of HCP, Inc. (NYSE:HCP), with a stake worth $231 million reported as of the end of September. Trailing Zimmer Partners was AEW Capital Management, which amassed a stake valued at $142.2 million. Balyasny Asset Management, D E Shaw, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Zimmer Partners, managed by Stuart J. Zimmer, created the largest position in HCP, Inc. (NYSE:HCP). Zimmer Partners had $231 million invested in the company at the end of the quarter. Jasjit Rekhi's Sanoor Capital also made a $7.7 million investment in the stock during the quarter. The following funds were also among the new HCP investors: Sander Gerber's Hudson Bay Capital Management, Matthew Tewksbury's Stevens Capital Management, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as HCP, Inc. (NYSE:HCP) but similarly valued. These stocks are Cardinal Health, Inc. (NYSE:CAH), Mercadolibre Inc (NASDAQ:MELI), Restaurant Brands International Inc (NYSE:QSR), and Franco-Nevada Corporation (NYSE:FNV). This group of stocks' market values match HCP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAH,35,927097,8 MELI,31,1207837,4 QSR,37,3179351,-3 FNV,23,425505,7 Average,31.5,1434948,4 [/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 $1435 million. That figure was $777 million in HCP's case. Restaurant Brands International Inc (NYSE:QSR) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 23 bullish hedge fund positions. HCP, Inc. (NYSE:HCP) 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 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately HCP wasn't in this group. Hedge funds that bet on HCP were disappointed as the stock returned 12.8% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.