It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a foolproof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong sometimes, as in the case of some of their top picks from the index like Micron and Anadarko. The data, though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.
Canadian Pacific Railway Limited (USA) (NYSE:CP) was in 39 hedge funds’ portfolios at the end of September. CP investors should pay attention to a decrease in support from the world’s most elite money managers of late. There were 51 hedge funds in our database with CP positions at the end of the previous quarter. At the end of this article we will also compare CP to other stocks, including Boston Scientific Corporation (NYSE:BSX), PPL Corporation (NYSE:PPL), and Energy Transfer Equity, L.P. (NYSE:ETE) to get a better sense of its popularity.
Follow Canadian Pacific Railway Ltd (NYSE:CP)
Follow Canadian Pacific Railway Ltd (NYSE:CP)
To the average investor, there are a multitude of gauges stock market investors employ to assess stocks. Some of the less known gauges are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the broader indices by a solid amount (see the details here).
Keeping this in mind, let’s go over the fresh action regarding Canadian Pacific Railway Limited (USA) (NYSE:CP).
What have hedge funds been doing with Canadian Pacific Railway Limited (USA) (NYSE:CP)?
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a slump of 24% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Pershing Square, managed by Bill Ackman, holds the most valuable position in Canadian Pacific Railway Limited (USA) (NYSE:CP). According to its most recent quarterly report, the fund has a $2 billion stake in the company, comprising 14.3% of its 13F portfolio. Sitting at the No. 2 spot is Viking Global, managed by Andreas Halvorsen, which holds a $597.5 million position; the fund has 2.3% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish comprise Daniel S. Och’s OZ Management, Ken Griffin’s Citadel Investment Group and Paul Reeder and Edward Shapiro’s PAR Capital Management.
Because Canadian Pacific Railway Limited (USA) (NYSE:CP) has witnessed a declination in interest from the smart money, it’s easy to see that there exists a select few fund managers who sold off their entire stakes heading into Q4. At the top of the heap, David Stemerman’s Conatus Capital Management sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $69 million in stock, and Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management was right behind this move, as the fund dumped about $39.8 million worth of CP shares. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 12 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Canadian Pacific Railway Limited (USA) (NYSE:CP). We will take a look at Boston Scientific Corporation (NYSE:BSX), PPL Corporation (NYSE:PPL), Energy Transfer Equity, L.P. (NYSE:ETE), and Koninklijke Philips Electronics NV (ADR) (NYSE:PHG). This group of stocks’ market values resemble CP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSX | 37 | 1479895 | 2 |
| PPL | 23 | 801609 | 1 |
| ETE | 27 | 709740 | -6 |
| PHG | 8 | 305627 | -5 |
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $824 million. Boston Scientific Corporation (NYSE:BSX) is the most popular stock in this table, whereas Koninklijke Philips Electronics NV (ADR) (NYSE:PHG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Canadian Pacific Railway Limited (USA) (NYSE:CP) is more popular among hedge funds and has also managed to attract a significantly higher amount of the hedgies’ money: $3.98 billion at the end of the quarter. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
