Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards International Paper Company (NYSE:IP) to find out whether there were any major changes in hedge funds’ views.
International Paper Company (NYSE:IP) has experienced an increase in hedge fund interest in recent months. International Paper Company (NYSE:IP) was in 36 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 31 hedge funds in our database with IP holdings at the end of December. Our calculations also showed that IP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Thomas Claugus of GMT Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a peek at the new hedge fund action regarding International Paper Company (NYSE:IP).
Do Hedge Funds Think IP Is A Good Stock To Buy Now?
At Q1’s end, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IP over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Millennium Management held the most valuable stake in International Paper Company (NYSE:IP), which was worth $41.8 million at the end of the fourth quarter. On the second spot was Adage Capital Management which amassed $34.8 million worth of shares. Citadel Investment Group, AQR Capital Management, and Citadel Investment Group 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 Appian Way Asset Management allocated the biggest weight to International Paper Company (NYSE:IP), around 8.59% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, earmarking 3.65 percent of its 13F equity portfolio to IP.
As one would reasonably expect, key hedge funds were breaking ground themselves. Appian Way Asset Management, managed by Andrew Byington, created the biggest position in International Paper Company (NYSE:IP). Appian Way Asset Management had $16.8 million invested in the company at the end of the quarter. Frank Fu’s CaaS Capital also made a $8.1 million investment in the stock during the quarter. The following funds were also among the new IP investors: Thomas E. Claugus’s GMT Capital, Renaissance Technologies, and Israel Englander’s Millennium Management.
Let’s check out 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 CNH Industrial NV (NYSE:CNHI), Plug Power, Inc. (NASDAQ:PLUG), XP Inc. (NASDAQ:XP), HubSpot Inc (NYSE:HUBS), Fox Corporation (NASDAQ:FOX), Fox Corporation (NASDAQ:FOXA), and W.W. Grainger, Inc. (NYSE:GWW). This group of stocks’ market caps match IP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNHI | 23 | 739950 | 7 |
| PLUG | 25 | 612662 | 4 |
| XP | 23 | 480268 | -6 |
| HUBS | 46 | 1738961 | -6 |
| FOX | 25 | 774862 | 8 |
| FOXA | 38 | 865348 | -1 |
| GWW | 30 | 351308 | 0 |
| Average | 30 | 794766 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $795 million. That figure was $260 million in IP’s case. HubSpot Inc (NYSE:HUBS) is the most popular stock in this table. On the other hand CNH Industrial NV (NYSE:CNHI) is the least popular one with only 23 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 68.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on IP, though not to the same extent, as the stock returned 13.1% since Q1 (through June 25th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
