Hewlett-Packard Company (HPQ): Insiders Aren’t Crazy About It

Is Hewlett-Packard Company (NYSE:HPQ) a marvelous investment right now? The best stock pickers are becoming less hopeful. The number of bullish hedge fund positions were cut by 4 recently.

In the eyes of most market participants, hedge funds are assumed to be unimportant, outdated investment vehicles of the past. While there are over 8000 funds in operation today, we at Insider Monkey hone in on the aristocrats of this group, close to 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total asset base, and by paying attention to their highest performing stock picks, we have figured out a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as key, optimistic insider trading sentiment is a second way to parse down the investments you’re interested in. Just as you’d expect, there are many stimuli for an upper level exec to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the impressive potential of this strategy if you understand what to do (learn more here).

Now, let’s take a peek at the key action regarding Hewlett-Packard Company (NYSE:HPQ).

How are hedge funds trading Hewlett-Packard Company (NYSE:HPQ)?

At the end of the first quarter, a total of 47 of the hedge funds we track held long positions in this stock, a change of -8% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially.

According to our comprehensive database, Relational Investors, managed by Ralph V. Whitworth, holds the biggest position in Hewlett-Packard Company (NYSE:HPQ). Relational Investors has a $823.3 million position in the stock, comprising 15.8% of its 13F portfolio. The second largest stake is held by Richard S. Pzena of Pzena Investment Management, with a $818.3 million position; 5.7% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Andreas Halvorsen’s Viking Global, Donald Yacktman’s Yacktman Asset Management and David Cohen and Harold Levy’s Iridian Asset Management.

Since Hewlett-Packard Company (NYSE:HPQ) has experienced a declination in interest from the smart money, it’s safe to say that there lies a certain “tier” of fund managers that elected to cut their entire stakes heading into Q2. Intriguingly, Jim Simons’s Renaissance Technologies sold off the biggest position of the “upper crust” of funds we track, worth an estimated $69.9 million in stock., and Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital was right behind this move, as the fund cut about $48.1 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 4 funds heading into Q2.

What have insiders been doing with Hewlett-Packard Company (NYSE:HPQ)?

Bullish insider trading is most useful when the primary stock in question has seen transactions within the past six months. Over the last 180-day time frame, Hewlett-Packard Company (NYSE:HPQ) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Hewlett-Packard Company (NYSE:HPQ). These stocks are Silicon Graphics International Corp (NASDAQ:SGI), Cray Inc. (NASDAQ:CRAY), International Business Machines Corp. (NYSE:IBM), and Teradata Corporation (NYSE:TDC). This group of stocks are the members of the diversified computer systems industry and their market caps match HPQ’s market cap.