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International Paper Co (IP): Are Hedge Funds Right About This Stock?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

In this article, we are going to take a closer look at International Paper Co (NYSE:IPand the hedge fund sentiment towards it. During the third quarter, the number of funds from the Insider Monkey database long the stock surged to 33 from 20. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Realty Income Corp (NYSE:O), Analog Devices, Inc. (NASDAQ:ADI), and Magellan Midstream Partners, L.P. (NYSE:MMP) to gather more data points.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, we’re going to go over the new action surrounding International Paper Co (NYSE:IP).

What have hedge funds been doing with International Paper Co (NYSE:IP)?

At the end of the third quarter, 33 of the hedge funds tracked by Insider Monkey were long International Paper Co, which represents an increase of 65% from the previous quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

HedgeFundSentimentChart

According to Insider Monkey’s hedge fund database, Cliff Asness’ AQR Capital Management has the largest position in International Paper Co (NYSE:IP), worth close to $119.7 million, comprising 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Israel Englander’s Millennium Management holding a $48 million position; the fund has 0.1% of its 13F portfolio invested in the stock.

Now, key money managers have been driving this bullishness. Millennium Management initiated the largest position in International Paper Co (NYSE:IP). It was followed by Mark Kingdon’s Kingdon Capital, which also initiated a $46.7 million position during the quarter. The following funds were also among the new IP investors: Aaron Cowen’s Suvretta Capital Management, Steve Cohen’s Point72 Asset Management, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to International Paper Co (NYSE:IP). These stocks are Realty Income Corp (NYSE:O), Analog Devices, Inc. (NASDAQ:ADI), Magellan Midstream Partners, L.P. (NYSE:MMP), and Roper Industries, Inc. (NYSE:ROP). This group of stocks’ market valuations resemble IP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
O 20 170614 6
ADI 27 1281274 1
MMP 14 123130 -2
ROP 18 489639 -12

As you can see these stocks had an average of 20 funds with bullish positions and the average amount invested in these stocks was $516 million, compared to $457 million in IP’s case. Analog Devices, Inc. (NASDAQ:ADI) is the most popular stock in this table with 28 funds holding shares. On the other hand Magellan Midstream Partners, L.P. (NYSE:MMP) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks International Paper Co (NYSE:IP) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.