The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of HCP, Inc. (NYSE:HCP) and find out how it is affected by the hedge funds’ moves.
HCP, Inc. (NYSE:HCP) has experienced a decrease in hedge fund interest in recent months. HCP was in 17 hedge funds’ portfolios at the end of September. There were 19 hedge funds in our database with HCP positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Paychex, Inc. (NASDAQ:PAYX), Potash Corp./Saskatchewan (USA) (NYSE:POT), and Vornado Realty Trust (NYSE:VNO) to gather more data points.
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Today there are numerous methods investors use to value stocks. A couple of the most useful methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the market by a healthy amount (see the details here).
Now, we’re going to go over the new action encompassing HCP, Inc. (NYSE:HCP).
How have hedgies been trading HCP, Inc. (NYSE:HCP)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AEW Capital Management, managed by Jeffrey Furber, holds the number one position in HCP, Inc. (NYSE:HCP). AEW Capital Management has a $112.4 million position in the stock, comprising 2.6% of its 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $64.8 million position; 0.2% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism contain Cliff Asness’s AQR Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management and Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors.
Since HCP, Inc. (NYSE:HCP) has faced falling interest from hedge fund managers, logic holds that there was a specific group of hedgies who sold off their positions entirely heading into Q4. It’s worth mentioning that David Harding’s Winton Capital Management said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $10 million in stock. Navellier & Associates, also dropped its stock, about $1.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to HCP, Inc. (NYSE:HCP). These stocks are Paychex, Inc. (NASDAQ:PAYX), Potash Corp./Saskatchewan (USA) (NYSE:POT), Vornado Realty Trust (NYSE:VNO), and Intuitive Surgical, Inc. (NASDAQ:ISRG). This group of stocks’ market caps match HCP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAYX | 22 | 485273 | -9 |
| POT | 31 | 822713 | 1 |
| VNO | 23 | 528621 | 3 |
| ISRG | 34 | 961959 | 2 |
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $700 million. That figure was $265 million in HCP’s case. Intuitive Surgical, Inc. (NASDAQ:ISRG) is the most popular stock in this table, while Paychex, Inc. (NASDAQ:PAYX) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks HCP, Inc. (NYSE:HCP) is even less popular than PAYX. Considering that hedge funds aren’t fond of this stock in relation to other companies mentioned in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
