Should I Buy The Cooper Companies, Inc. (COO)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards The Cooper Companies, Inc. (NYSE:COO).

Is The Cooper Companies, Inc. (NYSE:COO) ready to rally soon? Hedge funds were in an optimistic mood. The number of long hedge fund bets rose by 4 lately. The Cooper Companies, Inc. (NYSE:COO) was in 37 hedge funds’ portfolios at the end of September. The all time high for this statistic is 43. Our calculations also showed that COO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 33 hedge funds in our database with COO positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we’re going to go over the recent hedge fund action surrounding The Cooper Companies, Inc. (NYSE:COO).

David Blood of Generation Investment Management

Do Hedge Funds Think COO Is A Good Stock To Buy Now?

At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in COO over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Generation Investment Management was the largest shareholder of The Cooper Companies, Inc. (NYSE:COO), with a stake worth $661.1 million reported as of the end of September. Trailing Generation Investment Management was Impax Asset Management, which amassed a stake valued at $84 million. Intermede Investment Partners, Two Sigma Advisors, and Woodline Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to The Cooper Companies, Inc. (NYSE:COO), around 2.75% of its 13F portfolio. Parkman Healthcare Partners is also relatively very bullish on the stock, dishing out 2.52 percent of its 13F equity portfolio to COO.

As industrywide interest jumped, specific money managers were breaking ground themselves. Impax Asset Management, managed by Ian Simm, assembled the biggest position in The Cooper Companies, Inc. (NYSE:COO). Impax Asset Management had $84 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $24.9 million position during the quarter. The other funds with brand new COO positions are Steve Cohen’s Point72 Asset Management, Efrem Kamen’s Pura Vida Investments, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks similar to The Cooper Companies, Inc. (NYSE:COO). These stocks are Regions Financial Corporation (NYSE:RF), The Clorox Company (NYSE:CLX), Cenovus Energy Inc (NYSE:CVE), Church & Dwight Co., Inc. (NYSE:CHD), Expeditors International of Washington, Inc. (NASDAQ:EXPD), Teladoc Health, Inc (NYSE:TDOC), and Enphase Energy Inc (NASDAQ:ENPH). This group of stocks’ market values match COO’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.9 hedge funds with bullish positions and the average amount invested in these stocks was $1026 million. That figure was $1403 million in COO’s case. Enphase Energy Inc (NASDAQ:ENPH) is the most popular stock in this table. On the other hand Church & Dwight Co., Inc. (NYSE:CHD) is the least popular one with only 20 bullish hedge fund positions. The Cooper Companies, Inc. (NYSE:COO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COO is 61.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately COO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on COO were disappointed as the stock returned -8.9% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.