Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like The Cooper Companies, Inc. (NYSE:COO).
The Cooper Companies, Inc. (NYSE:COO) investors should be aware of an increase in support from the world’s most elite money managers of late. Our calculations also showed that COO isn’t among the 30 most popular stocks among hedge funds.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s go over the latest hedge fund action encompassing The Cooper Companies, Inc. (NYSE:COO).
What does the smart money think about The Cooper Companies, Inc. (NYSE:COO)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in COO over the last 14 quarters. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Generation Investment Management, managed by David Blood and Al Gore, holds the most valuable position in The Cooper Companies, Inc. (NYSE:COO). Generation Investment Management has a $834.5 million position in the stock, comprising 7% of its 13F portfolio. Sitting at the No. 2 spot is Gabriel Plotkin of Melvin Capital Management, with a $63.6 million position; 0.9% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish comprise Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Ken Fisher’s Fisher Asset Management.
As one would reasonably expect, key hedge funds have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, initiated the largest position in The Cooper Companies, Inc. (NYSE:COO). Melvin Capital Management had $63.6 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $7.2 million position during the quarter. The following funds were also among the new COO investors: Ian Simm’s Impax Asset Management, Ray Dalio’s Bridgewater Associates, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Cooper Companies, Inc. (NYSE:COO) but similarly valued. These stocks are Principal Financial Group Inc (NASDAQ:PFG), CNH Industrial NV (NYSE:CNHI), STMicroelectronics N.V. (NYSE:STM), and ZTO Express (Cayman) Inc. (NYSE:ZTO). All of these stocks’ market caps match COO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PFG | 18 | 98221 | 3 |
| CNHI | 16 | 295732 | 2 |
| STM | 11 | 168370 | 0 |
| ZTO | 13 | 305011 | 1 |
| Average | 14.5 | 216834 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $1104 million in COO’s case. Principal Financial Group Inc (NASDAQ:PFG) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks The Cooper Companies, Inc. (NYSE:COO) is more popular among hedge funds. 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. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on COO, though not to the same extent, as the stock returned 16% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
