Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in International Paper Company (NYSE:IP)? The smart money sentiment can provide an answer to this question.
Is International Paper Company (NYSE:IP) undervalued? The smart money is becoming less confident. The number of long hedge fund positions decreased by 5 lately. Our calculations also showed that ip isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most stock holders, hedge funds are perceived as worthless, old investment vehicles of the past. While there are greater than 8000 funds in operation at the moment, Our researchers choose to focus on the elite of this group, approximately 750 funds. These money managers command the lion’s share of all hedge funds’ total capital, and by keeping an eye on their highest performing stock picks, Insider Monkey has brought to light many investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by around 5 percentage points a year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
We’re going to take a peek at the recent hedge fund action surrounding International Paper Company (NYSE:IP).
What does the smart money think about International Paper Company (NYSE:IP)?
Heading into the second quarter of 2019, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards IP over the last 15 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in International Paper Company (NYSE:IP). AQR Capital Management has a $128.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is 12th Street Asset Management, managed by Michael O’Keefe, which holds a $25.6 million position; the fund has 6.8% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Ray Dalio’s Bridgewater Associates, and Joel Greenblatt’s Gotham Asset Management.
Due to the fact that International Paper Company (NYSE:IP) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers who were dropping their full holdings in the third quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest investment of the 700 funds watched by Insider Monkey, worth about $6.3 million in call options. Dmitry Balyasny’s fund, Balyasny Asset Management, also sold off its call options, about $5.8 million worth. These transactions are interesting, as total hedge fund interest was cut by 5 funds in the third quarter.
Let’s now take a look at 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 Liberty Global plc (NASDAQ:LBTYA), Veeva Systems Inc (NYSE:VEEV), Incyte Corporation (NASDAQ:INCY), and ORIX Corporation (NYSE:IX). This group of stocks’ market caps are closest to IP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LBTYA | 28 | 1332379 | -4 |
| VEEV | 27 | 654411 | -4 |
| INCY | 39 | 3888539 | 5 |
| IX | 6 | 16223 | -1 |
| Average | 25 | 1472888 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1473 million. That figure was $251 million in IP’s case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 6 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately IP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IP were disappointed as the stock returned -8.7% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
