Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We 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. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Hewlett Packard Enterprise Company (NYSE:HPE).
Is Hewlett Packard Enterprise Company (NYSE:HPE) a great stock to buy now? Prominent investors are taking a bullish view. The number of bullish hedge fund positions rose by 10 recently. Our calculations also showed that HPE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). HPE was in 41 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 31 hedge funds in our database with HPE positions at the end of the previous quarter.
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.
Richard S. Pzena of Pzena Investment Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the recent hedge fund action encompassing Hewlett Packard Enterprise Company (NYSE:HPE).
How are hedge funds trading Hewlett Packard Enterprise Company (NYSE:HPE)?
At the end of the fourth quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 32% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards HPE over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Hewlett Packard Enterprise Company (NYSE:HPE), which was worth $540.4 million at the end of the third quarter. On the second spot was Oldfield Partners which amassed $115 million worth of shares. Citadel Investment Group, GAMCO Investors, and AQR 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 Oldfield Partners allocated the biggest weight to Hewlett Packard Enterprise Company (NYSE:HPE), around 10.2% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, designating 2.52 percent of its 13F equity portfolio to HPE.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Renaissance Technologies, created the biggest position in Hewlett Packard Enterprise Company (NYSE:HPE). Renaissance Technologies had $26.1 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $7.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Qing Li’s Sciencast Management, Michael Gelband’s ExodusPoint Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Hewlett Packard Enterprise Company (NYSE:HPE) but similarly valued. These stocks are Hess Corporation (NYSE:HES), Pembina Pipeline Corp (NYSE:PBA), CGI Inc. (NYSE:GIB), and DexCom, Inc. (NASDAQ:DXCM). This group of stocks’ market values are similar to HPE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HES | 34 | 536867 | -4 |
| PBA | 17 | 48892 | 5 |
| GIB | 19 | 351250 | 3 |
| DXCM | 40 | 1052915 | 4 |
| Average | 27.5 | 497481 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $497 million. That figure was $1049 million in HPE’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Pembina Pipeline Corp (NYSE:PBA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Hewlett Packard Enterprise Company (NYSE:HPE) is more popular among hedge funds. 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 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately HPE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HPE were disappointed as the stock returned -46.8% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
