We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Hewlett Packard Enterprise Company (NYSE:HPE) and determine whether hedge funds skillfully traded this stock.
Is Hewlett Packard Enterprise Company (NYSE:HPE) the right investment to pursue these days? The best stock pickers were becoming more confident. The number of bullish hedge fund bets moved up by 2 in recent months. Hewlett Packard Enterprise Company (NYSE:HPE) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistics is 71. Our calculations also showed that HPE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are perceived as unimportant, old investment tools of the past. While there are over 8000 funds with their doors open today, We choose to focus on the leaders of this group, about 850 funds. These hedge fund managers oversee the lion’s share of the smart money’s total asset base, and by tailing their unrivaled stock picks, Insider Monkey has revealed a number of investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s check out the new hedge fund action regarding Hewlett Packard Enterprise Company (NYSE:HPE).
Hedge fund activity in Hewlett Packard Enterprise Company (NYSE:HPE)
At the end of June, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in HPE a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the largest position in Hewlett Packard Enterprise Company (NYSE:HPE), worth close to $382 million, amounting to 2.5% of its total 13F portfolio. Sitting at the No. 2 spot is Oldfield Partners, managed by Richard Oldfield, which holds a $69.8 million position; 8.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise Israel Englander’s Millennium Management, Robert Pitts’s Steadfast Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Oldfield Partners allocated the biggest weight to Hewlett Packard Enterprise Company (NYSE:HPE), around 8.1% of its 13F portfolio. Cloverdale Capital Management is also relatively very bullish on the stock, setting aside 2.71 percent of its 13F equity portfolio to HPE.
Consequently, specific money managers have been driving this bullishness. Steadfast Capital Management, managed by Robert Pitts, assembled the biggest position in Hewlett Packard Enterprise Company (NYSE:HPE). Steadfast Capital Management had $44.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $9 million investment in the stock during the quarter. The other funds with brand new HPE positions are C. Jonathan Gattman’s Cloverdale Capital Management, Ray Dalio’s Bridgewater Associates, and Mika Toikka’s AlphaCrest Capital Management.
Let’s check out hedge fund activity in other stocks similar to Hewlett Packard Enterprise Company (NYSE:HPE). These stocks are Grifols SA (NASDAQ:GRFS), Nucor Corporation (NYSE:NUE), FactSet Research Systems Inc. (NYSE:FDS), Seagate Technology plc (NASDAQ:STX), Masimo Corporation (NASDAQ:MASI), AngloGold Ashanti Limited (NYSE:AU), and Godaddy Inc (NYSE:GDDY). This group of stocks’ market valuations match HPE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GRFS | 21 | 583023 | -2 |
| NUE | 26 | 115702 | 0 |
| FDS | 21 | 200608 | 0 |
| STX | 27 | 2100119 | -5 |
| MASI | 32 | 160712 | 1 |
| AU | 16 | 726270 | -3 |
| GDDY | 55 | 2539026 | 1 |
| Average | 28.3 | 917923 | -1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $918 million. That figure was $694 million in HPE’s case. Godaddy Inc (NYSE:GDDY) is the most popular stock in this table. On the other hand AngloGold Ashanti Limited (NYSE:AU) is the least popular one with only 16 bullish hedge fund positions. Hewlett Packard Enterprise Company (NYSE:HPE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HPE is 39.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. Unfortunately HPE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on HPE were disappointed as the stock returned -2.5% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Hewlett Packard Enterprise Co (NYSE:HPE)
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Disclosure: None. This article was originally published at Insider Monkey.
