Hewlett Packard Enterprise Company (HPE) Fell Out Of Favor With Hedge Funds

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Hewlett Packard Enterprise Company (NYSE:HPE).

Hewlett Packard Enterprise Company (NYSE:HPE) has experienced a decrease in hedge fund sentiment lately. Hewlett Packard Enterprise Company (NYSE:HPE) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 71. There were 30 hedge funds in our database with HPE holdings at the end of December. Our calculations also showed that HPE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to take a look at the fresh hedge fund action surrounding Hewlett Packard Enterprise Company (NYSE:HPE).

Do Hedge Funds Think HPE Is A Good Stock To Buy Now?

At first quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in HPE a year ago. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is HPE A Good Stock To Buy?

The largest stake in Hewlett Packard Enterprise Company (NYSE:HPE) was held by Pzena Investment Management, which reported holding $676.4 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $149.7 million position. Other investors bullish on the company included Oldfield Partners, Millennium Management, and GAMCO Investors. In terms of the portfolio weights assigned to each position Oldfield Partners allocated the biggest weight to Hewlett Packard Enterprise Company (NYSE:HPE), around 11.13% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, earmarking 2.75 percent of its 13F equity portfolio to HPE.

Because Hewlett Packard Enterprise Company (NYSE:HPE) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies that elected to cut their full holdings heading into Q2. Interestingly, Renaissance Technologies dropped the biggest investment of all the hedgies tracked by Insider Monkey, comprising about $62.6 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $4.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds heading into Q2.

Let’s now review hedge fund activity in other stocks similar to Hewlett Packard Enterprise Company (NYSE:HPE). These stocks are Western Digital Corporation (NASDAQ:WDC), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Teradyne, Inc. (NYSE:TER), Vipshop Holdings Limited (NYSE:VIPS), Fortis Inc. (NYSE:FTS), Cheniere Energy Partners LP (NYSE:CQP), and Entergy Corporation (NYSE:ETR). All of these stocks’ market caps match HPE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WDC 58 1913662 14
TTWO 41 822415 -14
TER 44 1587670 -3
VIPS 54 1341628 27
FTS 10 179412 1
CQP 2 8851 -2
ETR 31 857729 -5
Average 34.3 958767 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.3 hedge funds with bullish positions and the average amount invested in these stocks was $959 million. That figure was $1067 million in HPE’s case. Western Digital Corporation (NASDAQ:WDC) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 2 bullish hedge fund positions. Hewlett Packard Enterprise Company (NYSE:HPE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HPE is 35.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately HPE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); HPE investors were disappointed as the stock returned -6.7% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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