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Hedge Funds Are Betting On International Paper Company (IP)

Is International Paper Company (NYSE:IP) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

International Paper Company (NYSE:IP) shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. Our calculations also showed that IP isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

We’re going to view the fresh hedge fund action regarding International Paper Company (NYSE:IP).

What does the smart money think about International Paper Company (NYSE:IP)?

At Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards IP over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

IP_dec2018

More specifically, Levin Capital Strategies was the largest shareholder of International Paper Company (NYSE:IP), with a stake worth $115.6 million reported as of the end of September. Trailing Levin Capital Strategies was Balyasny Asset Management, which amassed a stake valued at $42.6 million. Renaissance Technologies, Adage Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, specific money managers were leading the bulls’ herd. 12th Street Asset Management, managed by Michael O’Keefe, established the biggest position in International Paper Company (NYSE:IP). 12th Street Asset Management had $12.3 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $11.3 million position during the quarter. The other funds with brand new IP positions are Israel Englander’s Millennium Management, Philippe Jabre’s Jabre Capital Partners, and Roger Ibbotson’s Zebra Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as International Paper Company (NYSE:IP) but similarly valued. These stocks are Nucor Corporation (NYSE:NUE), W.W. Grainger, Inc. (NYSE:GWW), AutoZone, Inc. (NYSE:AZO), and AmerisourceBergen Corporation (NYSE:ABC). This group of stocks’ market values match IP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NUE 31 553668 2
GWW 30 617996 7
AZO 30 920242 -2
ABC 32 608745 -4
Average 30.75 675 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.75 hedge funds with bullish positions and the average amount invested in these stocks was $675 million. That figure was $328 million in IP’s case. AmerisourceBergen Corporation (NYSE:ABC) is the most popular stock in this table. On the other hand W.W. Grainger, Inc. (NYSE:GWW) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks International Paper Company (NYSE:IP) is even less popular than GWW. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed 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.

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

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