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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about International Paper Company (NYSE:IP) in this article.
Is IP stock a buy? International Paper Company (NYSE:IP) was in 31 hedge funds' portfolios at the end of December. The all time high for this statistic is 34. IP has seen a decrease in hedge fund interest recently. There were 32 hedge funds in our database with IP positions at the end of the third quarter. Our calculations also showed that IP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are numerous formulas stock traders have at their disposal to grade publicly traded companies. Some of the less utilized formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can trounce their index-focused peers by a healthy amount (see the details here).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 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 we're going to take a look at the latest hedge fund action regarding International Paper Company (NYSE:IP).
Do Hedge Funds Think IP Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in IP a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of International Paper Company (NYSE:IP), with a stake worth $33.3 million reported as of the end of December. Trailing Millennium Management was AQR Capital Management, which amassed a stake valued at $26.6 million. Levin Easterly Partners, Balyasny Asset Management, and Adage Capital 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 Levin Easterly Partners allocated the biggest weight to International Paper Company (NYSE:IP), around 3.21% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, setting aside 0.51 percent of its 13F equity portfolio to IP.
Judging by the fact that International Paper Company (NYSE:IP) has faced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedgies who were dropping their full holdings last quarter. Intriguingly, Donald Sussman's Paloma Partners said goodbye to the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $2.6 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also cut its stock, about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as International Paper Company (NYSE:IP) but similarly valued. We will take a look at Northern Trust Corporation (NASDAQ:NTRS), Warner Music Group Corp. (NASDAQ:WMG), Ameren Corporation (NYSE:AEE), Rollins, Inc. (NYSE:ROL), Teleflex Incorporated (NYSE:TFX), Kansas City Southern (NYSE:KSU), and Fortis Inc. (NYSE:FTS). This group of stocks' market valuations resemble IP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTRS,31,388257,3 WMG,29,1021052,9 AEE,19,313397,-1 ROL,28,644651,-1 TFX,30,790658,-10 KSU,49,1020598,-4 FTS,9,206819,1 Average,27.9,626490,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $626 million. That figure was $168 million in IP's case. Kansas City Southern (NYSE:KSU) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 9 bullish hedge fund positions. International Paper Company (NYSE:IP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IP is 58.9. 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 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on IP as the stock returned 13.7% since the end of Q4 (through 4/12) 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.