We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Helmerich & Payne, Inc. (NYSE:HP) based on that data.
Is Helmerich & Payne, Inc. (NYSE:HP) a buy right now? Investors who are in the know are in an optimistic mood. The number of bullish hedge fund bets increased by 4 recently. Our calculations also showed that HP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action regarding Helmerich & Payne, Inc. (NYSE:HP).
How have hedgies been trading Helmerich & Payne, Inc. (NYSE:HP)?
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HP over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Helmerich & Payne, Inc. (NYSE:HP), which was worth $94.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $81.3 million worth of shares. Renaissance Technologies, Fisher Asset Management, and Paloma Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Beddow Capital Management allocated the biggest weight to Helmerich & Payne, Inc. (NYSE:HP), around 3.14% of its 13F portfolio. Sprott Asset Management is also relatively very bullish on the stock, dishing out 2.57 percent of its 13F equity portfolio to HP.
Consequently, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in Helmerich & Payne, Inc. (NYSE:HP). Arrowstreet Capital had $46.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $17.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, David Harding’s Winton Capital Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now review hedge fund activity in other stocks similar to Helmerich & Payne, Inc. (NYSE:HP). These stocks are Webster Financial Corporation (NYSE:WBS), Spirit Realty Capital Inc (NYSE:SRC), Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), and MasTec, Inc. (NYSE:MTZ). This group of stocks’ market caps resemble HP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WBS | 24 | 472727 | -1 |
| SRC | 26 | 236430 | 5 |
| PNFP | 16 | 105654 | 0 |
| MTZ | 41 | 286474 | 8 |
| Average | 26.75 | 275321 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $275 million. That figure was $634 million in HP’s case. MasTec, Inc. (NYSE:MTZ) is the most popular stock in this table. On the other hand Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) is the least popular one with only 16 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately HP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HP were disappointed as the stock returned -62% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
