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 Huaneng Power International Inc (NYSE:HNP)? The smart money sentiment can provide an answer to this question.
Is HNP stock a buy? Huaneng Power International Inc (NYSE:HNP) was in 4 hedge funds’ portfolios at the end of March. The all time high for this statistic is 5. HNP has seen an increase in enthusiasm from smart money in recent months. There were 2 hedge funds in our database with HNP positions at the end of the fourth quarter. Our calculations also showed that HNP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
To most market participants, hedge funds are perceived as underperforming, outdated investment vehicles of years past. While there are more than 8000 funds trading today, Our experts hone in on the masters of this club, around 850 funds. Most estimates calculate that this group of people administer most of the hedge fund industry’s total asset base, and by paying attention to their matchless equity investments, Insider Monkey has deciphered a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a look at the latest hedge fund action surrounding Huaneng Power International Inc (NYSE:HNP).
Do Hedge Funds Think HNP Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HNP over the last 23 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the number one position in Huaneng Power International Inc (NYSE:HNP), worth close to $1.5 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $1.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers that hold long positions contain Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and . In terms of the portfolio weights assigned to each position Arrowstreet Capital allocated the biggest weight to Huaneng Power International Inc (NYSE:HNP), around 0.002% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0019 percent of its 13F equity portfolio to HNP.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in Huaneng Power International Inc (NYSE:HNP). Arrowstreet Capital had $1.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.2 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Huaneng Power International Inc (NYSE:HNP) but similarly valued. These stocks are Genworth Financial Inc (NYSE:GNW), American Woodmark Corporation (NASDAQ:AMWD), Great Western Bancorp Inc (NYSE:GWB), SEMrush Holdings, Inc. (NYSE:SEMR), Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), Addus Homecare Corporation (NASDAQ:ADUS), and Malibu Boats Inc (NASDAQ:MBUU). This group of stocks’ market values are closest to HNP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GNW | 24 | 186139 | -12 |
| AMWD | 14 | 51358 | 3 |
| GWB | 13 | 28756 | 0 |
| SEMR | 20 | 57490 | 20 |
| AUPH | 27 | 224594 | 3 |
| ADUS | 17 | 62230 | -1 |
| MBUU | 16 | 150234 | 0 |
| Average | 18.7 | 108686 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $4 million in HNP’s case. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is the most popular stock in this table. On the other hand Great Western Bancorp Inc (NYSE:GWB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Huaneng Power International Inc (NYSE:HNP) is even less popular than GWB. Our overall hedge fund sentiment score for HNP is 31. 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. Hedge funds dodged a bullet by taking a bearish stance towards HNP. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.2% in 2021 through June 11th but managed to beat the market again by 3.3 percentage points. Unfortunately HNP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); HNP investors were disappointed as the stock returned 5.9% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Huaneng Power International Inc (NYSE:HNP)
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Disclosure: None. This article was originally published at Insider Monkey.
