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Huaneng Power International Inc (HNP): Hedge Funds In Wait-and-See Mode

Nina Todic

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren't very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds' top 20 stock picks easily bested the broader market, at 34.7% compared to 26.2%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn't perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Hedge fund interest in Huaneng Power International Inc (NYSE:HNP) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as AerCap Holdings N.V. (NYSE:AER), Levi Strauss & Co. (NYSE:LEVI), and Qiagen NV (NYSE:QGEN) to gather more data points. Our calculations also showed that HNP isn't among the 30 most popular stocks among hedge funds.

In the eyes of most stock holders, hedge funds are assumed to be slow, old investment vehicles of years past. While there are more than 8000 funds trading today, Our researchers choose to focus on the elite of this group, about 750 funds. It is estimated that this group of investors direct the lion's share of all hedge funds' total asset base, and by observing their best equity investments, Insider Monkey has unsheathed various investment strategies that have historically beaten Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_27676" align="aligncenter" width="355"] Israel Englander of Millennium Management[/caption]

MILLENNIUM MANAGEMENT
MILLENNIUM MANAGEMENT

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. Let's take a glance at the fresh hedge fund action encompassing Huaneng Power International Inc (NYSE:HNP).

What does smart money think about Huaneng Power International Inc (NYSE:HNP)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2019. On the other hand, there were a total of 4 hedge funds with a bullish position in HNP a year ago. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

No of Hedge Funds with HNP Positions
No of Hedge Funds with HNP Positions

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the largest position in Huaneng Power International Inc (NYSE:HNP). Renaissance Technologies has a $2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Millennium Management, managed by Israel Englander, which holds a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. In terms of the portfolio weights assigned to each position Renaissance Technologies allocated the biggest weight to Huaneng Power International Inc (NYSE:HNP), around 0.0017% of its portfolio. Millennium Management is also relatively very bullish on the stock, setting aside 0.0005 percent of its 13F equity portfolio to HNP.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let's go over hedge fund activity in other stocks similar to Huaneng Power International Inc (NYSE:HNP). We will take a look at AerCap Holdings N.V. (NYSE:AER), Levi Strauss & Co. (NYSE:LEVI), Qiagen NV (NYSE:QGEN), and Tapestry, Inc. (NYSE:TPR). This group of stocks' market values are similar to HNP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AER,28,1220299,1 LEVI,10,21784,-5 QGEN,22,277049,-3 TPR,24,385305,-8 Average,21,476109,-3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $476 million. That figure was $3 million in HNP's case. AerCap Holdings N.V. (NYSE:AER) is the most popular stock in this table. On the other hand Levi Strauss & Co. (NYSE:LEVI) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Huaneng Power International Inc (NYSE:HNP) is even less popular than LEVI. Hedge funds dodged a bullet by taking a bearish stance towards HNP. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately HNP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HNP investors were disappointed as the stock returned 1.4% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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