Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of International Paper Company (NYSE:IP) and see how the stock is affected by the recent hedge fund activity.
International Paper Company (NYSE:IP) investors should be aware of a decrease in hedge fund sentiment in recent months. IP was in 32 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with IP positions at the end of the previous quarter. At the end of this article we will also compare IP to other stocks including Roper Technologies Inc (NYSE:ROP), Amphenol Corporation (NYSE:APH), and Campbell Soup Company (NYSE:CPB) to get a better sense of its popularity.
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In the eyes of most investors, hedge funds are seen as underperforming, outdated investment vehicles of years past. While there are greater than 8000 funds with their doors open at present, Our experts look at the top tier of this club, approximately 700 funds. Most estimates calculate that this group of people shepherd the majority of the smart money’s total capital, and by observing their highest performing investments, Insider Monkey has discovered a few investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, let’s check out the latest action regarding International Paper Company (NYSE:IP).
How have hedgies been trading International Paper Company (NYSE:IP)?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D E Shaw has the biggest position in International Paper Company (NYSE:IP), worth close to $153.1 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Masters Capital Management, managed by Mike Masters, which holds a $70.7 million call position; 2.4% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions consist of Cliff Asness’ AQR Capital Management, Jim Simons’ Renaissance Technologies and David Harding’s Winton Capital Management.
Due to the fact that International Paper Company (NYSE:IP) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Jacob Rothschild’s RIT Capital Partners cut the biggest investment of the 700 funds followed by Insider Monkey, valued at an estimated $23.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $12.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to International Paper Company (NYSE:IP). These stocks are Roper Technologies Inc (NYSE:ROP), Amphenol Corporation (NYSE:APH), Campbell Soup Company (NYSE:CPB), and NetEase, Inc (ADR) (NASDAQ:NTES). All of these stocks’ market caps match IP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROP | 28 | 683401 | 3 |
| APH | 26 | 433051 | 3 |
| CPB | 25 | 146622 | 5 |
| NTES | 26 | 2385050 | -10 |
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $912 million. That figure was $567 million in IP’s case. Roper Technologies Inc (NYSE:ROP) is the most popular stock in this table. On the other hand Campbell Soup Company (NYSE:CPB) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks International Paper Company (NYSE:IP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
