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Did Hedge Funds Make The Right Call On Helmerich & Payne, Inc. (HP) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Helmerich & Payne, Inc. (NYSE:HP) and determine whether hedge funds skillfully traded this stock.

Is Helmerich & Payne, Inc. (NYSE:HP) a buy right now? Investors who are in the know were reducing their bets on the stock. The number of bullish hedge fund positions fell by 6 recently. Our calculations also showed that HP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are tons of gauges stock traders use to grade publicly traded companies. Some of the most useful gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top money managers can trounce their index-focused peers by a significant amount (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the recent hedge fund action regarding Helmerich & Payne, Inc. (NYSE:HP).

Hedge fund activity in Helmerich & Payne, Inc. (NYSE:HP)

Heading into the second quarter of 2020, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HP over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in Helmerich & Payne, Inc. (NYSE:HP) was held by Renaissance Technologies, which reported holding $23.1 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $18.3 million position. Other investors bullish on the company included Two Sigma Advisors, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Beddow Capital Management allocated the biggest weight to Helmerich & Payne, Inc. (NYSE:HP), around 1.6% of its 13F portfolio. Magnolia Capital Fund is also relatively very bullish on the stock, earmarking 0.84 percent of its 13F equity portfolio to HP.

Seeing as Helmerich & Payne, Inc. (NYSE:HP) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedgies that decided to sell off their full holdings in the first quarter. At the top of the heap, Donald Sussman’s Paloma Partners dropped the largest investment of the 750 funds watched by Insider Monkey, worth an estimated $49.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $46.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 6 funds in the first quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Helmerich & Payne, Inc. (NYSE:HP) but similarly valued. These stocks are Hancock Whitney Corporation (NASDAQ:HWC), Atlantic Union Bankshares Corporation (NASDAQ:AUB), Cimarex Energy Co (NYSE:XEC), and American Equity Investment Life Holding Company (NYSE:AEL). This group of stocks’ market caps match HP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HWC 20 40474 4
AUB 10 14509 2
XEC 35 398770 2
AEL 12 43458 -5
Average 19.25 124303 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $115 million in HP’s case. Cimarex Energy Co (NYSE:XEC) is the most popular stock in this table. On the other hand Atlantic Union Bankshares Corporation (NASDAQ:AUB) is the least popular one with only 10 bullish hedge fund positions. Helmerich & Payne, Inc. (NYSE:HP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on HP as the stock returned 30.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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