Were Expert Investors Right About International Paper Company (IP)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards International Paper Company (NYSE:IP) at the end of the third quarter and determine whether the smart money was really smart about this stock.

International Paper Company (NYSE:IP) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 36. IP investors should pay attention to a decrease in support from the world’s most elite money managers of late. There were 31 hedge funds in our database with IP positions at the end of the second quarter. Our calculations also showed that IP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Sander Gerber of Hudson Bay Capital

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. With all of this in mind we’re going to go over the new hedge fund action encompassing International Paper Company (NYSE:IP).

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

At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2021. By comparison, 32 hedge funds held shares or bullish call options in IP a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in International Paper Company (NYSE:IP). AQR Capital Management has a $92.7 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is D. E. Shaw of D E Shaw, with a $47.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish include Ken Griffin’s Citadel Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and John Murphy’s Levin Easterly Partners. In terms of the portfolio weights assigned to each position Appian Way Asset Management allocated the biggest weight to International Paper Company (NYSE:IP), around 6.63% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, earmarking 2.49 percent of its 13F equity portfolio to IP.

Seeing as International Paper Company (NYSE:IP) has witnessed declining sentiment from the smart money, we can see that there exists a select few hedgies that slashed their entire stakes heading into Q4. Intriguingly, Brandon Haley’s Holocene Advisors dumped the biggest stake of all the hedgies monitored by Insider Monkey, comprising close to $2.6 million in stock. Robert Vincent McHugh’s fund, Jade Capital Advisors, also dropped its stock, about $2.5 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as International Paper Company (NYSE:IP) but similarly valued. These stocks are Kellogg Company (NYSE:K), KE Holdings Inc (NYSE:BEKE), Ventas, Inc. (NYSE:VTR), McCormick & Company, Incorporated (NYSE:MKC), DTE Energy Company (NYSE:DTE), FleetCor Technologies, Inc. (NYSE:FLT), and Dollar Tree, Inc. (NASDAQ:DLTR). This group of stocks’ market caps match IP’s market cap.

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As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $1145 million. That figure was $263 million in IP’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Kellogg Company (NYSE:K) is the least popular one with only 22 bullish hedge fund positions. International Paper Company (NYSE:IP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IP is 54. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, IP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on IP were disappointed as the stock returned -8% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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

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