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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in HP Inc. (NYSE:HPQ)? The smart money sentiment can provide an answer to this question.
Is HPQ stock a buy or sell? HP Inc. (NYSE:HPQ) has seen a decrease in activity from the world's largest hedge funds in recent months. HP Inc. (NYSE:HPQ) was in 39 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 59. There were 41 hedge funds in our database with HPQ holdings at the end of September. Our calculations also showed that HPQ isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let's check out the fresh hedge fund action encompassing HP Inc. (NYSE:HPQ).
Do Hedge Funds Think HPQ Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HPQ over the last 22 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of HP Inc. (NYSE:HPQ), with a stake worth $354.9 million reported as of the end of December. Trailing Arrowstreet Capital was AQR Capital Management, which amassed a stake valued at $254.1 million. GLG Partners, Two Sigma Advisors, and Balyasny Asset 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 BCK Capital allocated the biggest weight to HP Inc. (NYSE:HPQ), around 2.21% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, dishing out 1.4 percent of its 13F equity portfolio to HPQ.
Seeing as HP Inc. (NYSE:HPQ) has experienced falling interest from the smart money, we can see that there lies a certain "tier" of money managers that slashed their full holdings last quarter. It's worth mentioning that Seth Klarman's Baupost Group dropped the largest position of the 750 funds tracked by Insider Monkey, worth about $252.6 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $85.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to HP Inc. (NYSE:HPQ). These stocks are The Hershey Company (NYSE:HSY), Orange SA (NYSE:ORAN), New Oriental Education & Technology Group Inc. (NYSE:EDU), Seagen Inc. (NASDAQ:SGEN), SBA Communications Corporation (NASDAQ:SBAC), Royalty Pharma Plc (NASDAQ:RPRX), and ANSYS, Inc. (NASDAQ:ANSS). All of these stocks' market caps are closest to HPQ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HSY,39,1411098,-4 ORAN,3,6060,-1 EDU,43,2540561,3 SGEN,32,8619222,4 SBAC,43,1761954,0 RPRX,18,3384693,-2 ANSS,40,1633274,0 Average,31.1,2765266,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $2765 million. That figure was $1048 million in HPQ's case. New Oriental Education & Technology Group Inc. (NYSE:EDU) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. HP Inc. (NYSE:HPQ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HPQ is 67.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on HPQ as the stock returned 22.3% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.