Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In this article we are going to take a closer look at HP Inc. and how they are trading the stock.
HP Inc. (NYSE:HPQ) was in 49 hedge funds’ portfolios at the end of the fourth quarter of 2019. HPQ investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 41 hedge funds in our database with HPQ positions at the end of the previous quarter. Our calculations also showed that HPQ isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Seth Klarman of Baupost Group
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let’s take a glance at the new hedge fund action encompassing HP Inc. (NYSE:HPQ).
How are hedge funds trading HP Inc. (NYSE:HPQ)?
At the end of the fourth quarter, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the third quarter of 2019. On the other hand, there were a total of 40 hedge funds with a bullish position in HPQ a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Icahn Capital LP, managed by Carl Icahn, holds the number one position in HP Inc. (NYSE:HPQ). Icahn Capital LP has a $1.2927 billion position in the stock, comprising 4.9% of its 13F portfolio. Coming in second is Baupost Group, managed by Seth Klarman, which holds a $205.5 million position; 2.3% of its 13F portfolio is allocated to the company. Other peers that are bullish consist of John Overdeck and David Siegel’s Two Sigma Advisors, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Fort Baker Capital Management allocated the biggest weight to HP Inc. (NYSE:HPQ), around 10.92% of its 13F portfolio. Icahn Capital LP is also relatively very bullish on the stock, earmarking 4.94 percent of its 13F equity portfolio to HPQ.
Now, key money managers were leading the bulls’ herd. Baupost Group, managed by Seth Klarman, initiated the most outsized position in HP Inc. (NYSE:HPQ). Baupost Group had $205.5 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $45.5 million position during the quarter. The other funds with new positions in the stock are Carl Tiedemann and Michael Tiedemann’s TIG Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Clint Carlson’s Carlson Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as HP Inc. (NYSE:HPQ) but similarly valued. These stocks are eBay Inc (NASDAQ:EBAY), Atlassian Corporation Plc (NASDAQ:TEAM), AvalonBay Communities Inc (NYSE:AVB), and Canon Inc. (NYSE:CAJ). All of these stocks’ market caps are similar to HPQ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EBAY | 51 | 3621065 | -8 |
| TEAM | 62 | 2649059 | 9 |
| AVB | 23 | 442044 | 2 |
| CAJ | 8 | 69992 | 0 |
| Average | 36 | 1695540 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1696 million. That figure was $2547 million in HPQ’s case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 8 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 calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still beat the market by 1.9 percentage points. Hedge funds were also right about betting on HPQ as the stock returned -7.7% during the first quarter (through March 9th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
