In this article we will take a look at whether hedge funds think Helmerich & Payne, Inc. (NYSE:HP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Helmerich & Payne, Inc. (NYSE:HP) a marvelous investment today? The best stock pickers are becoming less hopeful. The number of long hedge fund bets retreated by 6 lately. Our calculations also showed that HP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
[caption id="attachment_27480" align="aligncenter" width="400"] Israel Englander of Millennium Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the latest hedge fund action encompassing Helmerich & Payne, Inc. (NYSE:HP).
How have hedgies been trading Helmerich & Payne, Inc. (NYSE:HP)?
At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the fourth quarter of 2019. By comparison, 31 hedge funds held shares or bullish call options in HP a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Helmerich & Payne, Inc. (NYSE:HP), with a stake worth $23.1 million reported as of the end of September. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $18.3 million. Two Sigma Advisors, Citadel Investment Group, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Beddow Capital Management allocated the biggest weight to Helmerich & Payne, Inc. (NYSE:HP), around 1.6% of its 13F portfolio. Magnolia Capital Fund is also relatively very bullish on the stock, earmarking 0.84 percent of its 13F equity portfolio to HP.
Because Helmerich & Payne, Inc. (NYSE:HP) has witnessed a decline in interest from the aggregate hedge fund industry, it's safe to say that there exists a select few fund managers who were dropping their entire stakes heading into Q4. Intriguingly, Donald Sussman's Paloma Partners dumped the largest stake of the "upper crust" of funds watched by Insider Monkey, comprising close to $49.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $46.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 6 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to Helmerich & Payne, Inc. (NYSE:HP). These stocks are Hancock Whitney Corporation (NASDAQ:HWC), Atlantic Union Bankshares Corporation (NASDAQ:AUB), Cimarex Energy Co (NYSE:XEC), and American Equity Investment Life Holding Company (NYSE:AEL). This group of stocks' market values resemble HP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HWC,20,40474,4 AUB,10,14509,2 XEC,35,398770,2 AEL,12,43458,-5 Average,19.25,124303,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $115 million in HP's case. Cimarex Energy Co (NYSE:XEC) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 10 bullish hedge fund positions. Helmerich & Payne, Inc. (NYSE:HP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on HP as the stock returned 34.5% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.