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 12.1% in 2019 (through May 30th). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of 18.7% during the same period, with the majority 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 QEP Resources Inc (NYSE:QEP).
QEP Resources Inc (NYSE:QEP) investors should pay attention to a decrease in hedge fund interest of late. QEP was in 23 hedge funds’ portfolios at the end of March. There were 25 hedge funds in our database with QEP holdings at the end of the previous quarter. Our calculations also showed that qep 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 40 percentage points since May 2014 through May 30, 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the latest hedge fund action regarding QEP Resources Inc (NYSE:QEP).
How are hedge funds trading QEP Resources Inc (NYSE:QEP)?
Heading into the second quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards QEP over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Paul Singer’s Elliott Management has the number one position in QEP Resources Inc (NYSE:QEP), worth close to $91.1 million, corresponding to 0.6% of its total 13F portfolio. On Elliott Management’s heels is D. E. Shaw of D E Shaw, with a $53.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish comprise Israel Englander’s Millennium Management, Robert Emil Zoellner’s Alpine Associates and John Paulson’s Paulson & Co.
Judging by the fact that QEP Resources Inc (NYSE:QEP) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers that elected to cut their full holdings last quarter. It’s worth mentioning that Steve Cohen’s Point72 Asset Management dumped the biggest stake of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $31.5 million in stock. Steven Richman’s fund, East Side Capital (RR Partners), also cut its stock, about $13.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as QEP Resources Inc (NYSE:QEP) but similarly valued. We will take a look at Atara Biotherapeutics Inc (NASDAQ:ATRA), Redfin Corporation (NASDAQ:RDFN), Alexander & Baldwin Inc (NYSE:ALEX), and iRhythm Technologies, Inc. (NASDAQ:IRTC). All of these stocks’ market caps are closest to QEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATRA | 15 | 672346 | 4 |
| RDFN | 8 | 177016 | 1 |
| ALEX | 5 | 8561 | -5 |
| IRTC | 24 | 320352 | 1 |
| Average | 13 | 294569 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $295 million. That figure was $292 million in QEP’s case. iRhythm Technologies, Inc. (NASDAQ:IRTC) is the most popular stock in this table. On the other hand Alexander & Baldwin Inc (NYSE:ALEX) is the least popular one with only 5 bullish hedge fund positions. QEP Resources Inc (NYSE:QEP) 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 QEP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on QEP were disappointed as the stock returned -10% 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.
