Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Cooper Companies, Inc. (NYSE:COO).
The Cooper Companies, Inc. (NYSE:COO) was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2019. COO investors should pay attention to a decrease in hedge fund sentiment lately. There were 31 hedge funds in our database with COO positions at the end of the previous quarter. Our calculations also showed that COO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
In today’s marketplace there are many metrics shareholders put to use to assess publicly traded companies. Some of the less known metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best money managers can trounce the broader indices by a significant amount (see the details here).
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. Keeping this in mind we’re going to view the fresh hedge fund action surrounding The Cooper Companies, Inc. (NYSE:COO).
Hedge fund activity in The Cooper Companies, Inc. (NYSE:COO)
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in COO 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.
When looking at the institutional investors followed by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the largest position in The Cooper Companies, Inc. (NYSE:COO), worth close to $491.2 million, comprising 3.1% of its total 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $92.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, Israel Englander’s Millennium Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Generation Investment Management allocated the biggest weight to The Cooper Companies, Inc. (NYSE:COO), around 3.14% of its 13F portfolio. Motley Fool Asset Management is also relatively very bullish on the stock, designating 1.6 percent of its 13F equity portfolio to COO.
Judging by the fact that The Cooper Companies, Inc. (NYSE:COO) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of fund managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Anna Nikolayevsky’s Axel Capital Management sold off the biggest stake of the 750 funds watched by Insider Monkey, comprising about $2.4 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund cut about $1.3 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Cooper Companies, Inc. (NYSE:COO) but similarly valued. These stocks are Expedia Group, Inc. (NASDAQ:EXPE), Seagate Technology plc (NASDAQ:STX), Loews Corporation (NYSE:L), and Huntington Bancshares Incorporated (NASDAQ:HBAN). All of these stocks’ market caps match COO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $1530 million. That figure was $765 million in COO’s case. Expedia Group, Inc.(NASDAQ:EXPE) is the most popular stock in this table. On the other hand Loews Corporation (NYSE:L) is the least popular one with only 24 bullish hedge fund positions. The Cooper Companies, Inc. (NYSE:COO) is not the least popular stock in this group but hedge fund interest is still below average. 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 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on COO as the stock returned -19.2% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.