Hedge Funds Are Betting On Canadian Pacific Railway Limited (USA) (CP)

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Canadian Pacific Railway Limited (USA) (NYSE:CP) was in 32 hedge funds’ portfolios at the end of September. CP has experienced an increase in hedge fund sentiment lately. There were 31 hedge funds in our database with CP positions at the end of the previous quarter. At the end of this article we will also compare CP to other stocks including Hormel Foods Corporation (NYSE:HRL), Omnicom Group Inc. (NYSE:OMC), and L Brands Inc (NYSE:LB) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Canadian Pacific Railway Limited (USA) (NYSE:CP)?

Heading into the fourth quarter of 2016, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a rise of 3% from the second quarter of 2016. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Andreas Halvorsen’s Viking Global has the number one position in Canadian Pacific Railway Limited (USA) (NYSE:CP), worth close to $548.9 million, comprising 2.4% of its total 13F portfolio. Sitting at the No. 2 spot is John Armitage of Egerton Capital Limited, with a $379.3 million position; 4.3% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism comprise John Griffin’s Blue Ridge Capital, and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, key hedge funds were breaking ground themselves. Egerton Capital Limited, assembled the most valuable position in Canadian Pacific Railway Limited (USA) (NYSE:CP). Balyasny Asset Management also made a $159.7 million investment in the stock during the quarter. The other funds with brand new CP positions are Alexander Mitchell’s Scopus Asset Management, Daniel S. Och’s OZ Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks similar to Canadian Pacific Railway Limited (USA) (NYSE:CP). We will take a look at Hormel Foods Corporation (NYSE:HRL), Omnicom Group Inc. (NYSE:OMC), L Brands Inc (NYSE:LB), and JD.Com Inc (ADR) (NASDAQ:JD). This group of stocks’ market values resemble CP’s market value.

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $2.54 billion. That figure was $2.23 billion in CP’s case. JD.Com Inc (ADR) (NASDAQ:JD) is the most popular stock in this table. On the other hand Omnicom Group Inc. (NYSE:OMC) is the least popular one with only 21 bullish hedge fund positions. Canadian Pacific Railway Limited (USA) (NYSE:CP) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard JD might be a better candidate to consider a long position.

Disclosure: None