We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Helmerich & Payne, Inc. (NYSE:HP).
Is Helmerich & Payne, Inc. (NYSE:HP) a first-rate investment today? Prominent investors are taking a bearish view. The number of long hedge fund positions shrunk by 5 in recent months. Our calculations also showed that HP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). HP was in 28 hedge funds' portfolios at the end of the third quarter of 2019. There were 33 hedge funds in our database with HP holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]
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 peek at the new hedge fund action surrounding Helmerich & Payne, Inc. (NYSE:HP).
Hedge fund activity in Helmerich & Payne, Inc. (NYSE:HP)
At Q3's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in HP a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Helmerich & Payne, Inc. (NYSE:HP), which was worth $58.8 million at the end of the third quarter. On the second spot was Millennium Management which amassed $37.3 million worth of shares. Renaissance Technologies, D E Shaw, and Royce & Associates 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 2.93% of its portfolio. Sprott Asset Management is also relatively very bullish on the stock, designating 2.73 percent of its 13F equity portfolio to HP.
Due to the fact that Helmerich & Payne, Inc. (NYSE:HP) has experienced bearish sentiment from the smart money, logic holds that there were a few fund managers that slashed their positions entirely last quarter. Intriguingly, Robert Polak's Anchor Bolt Capital dumped the biggest position of all the hedgies watched by Insider Monkey, totaling close to $14.2 million in stock, and Ray Dalio's Bridgewater Associates was right behind this move, as the fund dropped about $5.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 5 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Helmerich & Payne, Inc. (NYSE:HP). We will take a look at Assured Guaranty Ltd. (NYSE:AGO), China Biologic Products Holdings Inc (NASDAQ:CBPO), Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), and Companhia Siderurgica Nacional (NYSE:SID). This group of stocks' market values are similar to HP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGO,35,576379,-1 CBPO,14,504724,5 PNFP,15,84557,-3 SID,7,18261,-3 Average,17.75,295980,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $270 million in HP's case. Assured Guaranty Ltd. (NYSE:AGO) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 7 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. 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately HP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HP were disappointed as the stock returned 2.2% during the fourth quarter (through the end of November) 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.