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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Huaneng Power International Inc (NYSE:HNP) is 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, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Huaneng Power International Inc (NYSE:HNP) a buy here? Investors who are in the know are becoming less confident. The number of bullish hedge fund bets shrunk by 1 lately. Our calculations also showed that HNP 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). HNP was in 3 hedge funds’ portfolios at the end of December. There were 4 hedge funds in our database with HNP holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 check out the latest hedge fund action regarding Huaneng Power International Inc (NYSE:HNP).
How are hedge funds trading Huaneng Power International Inc (NYSE:HNP)?
At Q4’s end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HNP over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Huaneng Power International Inc (NYSE:HNP) was held by Renaissance Technologies, which reported holding $1.9 million worth of stock at the end of September. It was followed by Millennium Management with a $0.5 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Due to the fact that Huaneng Power International Inc (NYSE:HNP) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there were a few hedgies who sold off their entire stakes in the third quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group sold off the largest position of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $0.3 million in stock. Ran Pang’s fund, Quantamental Technologies, also dumped its stock, about $0 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Huaneng Power International Inc (NYSE:HNP). These stocks are American Homes 4 Rent (NYSE:AMH), Logitech International SA (NASDAQ:LOGI), Bruker Corporation (NASDAQ:BRKR), and GDS Holdings Limited (NASDAQ:GDS). This group of stocks’ market values are closest to HNP’s market value.
|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 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $576 million. That figure was $3 million in HNP’s case. GDS Holdings Limited (NASDAQ:GDS) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Huaneng Power International Inc (NYSE:HNP) is even less popular than LOGI. Hedge funds dodged a bullet by taking a bearish stance towards HNP. Our calculations showed that the top 20 most popular hedge fund stocks 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 managed to beat the market by 3.2 percentage points. Unfortunately HNP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HNP investors were disappointed as the stock returned -33.2% 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 most of these stocks already outperformed the market so far in Q1.
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.