Is IP A Good Stock To Buy According To Hedge Funds?

In this article we will take a look at whether hedge funds think International Paper Company (NYSE:IP) 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 IP a good stock to buy? The best stock pickers were betting on the stock. The number of bullish hedge fund positions inched up by 3 recently. International Paper Company (NYSE:IP) was in 32 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 34. Our calculations also showed that IP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are numerous gauges shareholders have at their disposal to appraise publicly traded companies. Two of the most innovative gauges are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outpace the broader indices by a very impressive margin (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now let’s view the fresh hedge fund action regarding International Paper Company (NYSE:IP).

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

At third quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IP over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, AQR Capital Management was the largest shareholder of International Paper Company (NYSE:IP), with a stake worth $68.8 million reported as of the end of September. Trailing AQR Capital Management was Levin Easterly Partners, which amassed a stake valued at $65.7 million. Citadel Investment Group, PEAK6 Capital Management, and Two Sigma Advisors 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 Levin Easterly Partners allocated the biggest weight to International Paper Company (NYSE:IP), around 2.61% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, earmarking 1.07 percent of its 13F equity portfolio to IP.

Consequently, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the most valuable position in International Paper Company (NYSE:IP). Balyasny Asset Management had $3.2 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $0.7 million position during the quarter. The other funds with brand new IP positions are David Harding’s Winton Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Robert Vincent McHugh’s Jade Capital Advisors.

Let’s now take a look at hedge fund activity in other stocks similar to International Paper Company (NYSE:IP). We will take a look at Teleflex Incorporated (NYSE:TFX), CBRE Group, Inc. (NYSE:CBRE), Arista Networks Inc (NYSE:ANET), Invitation Homes Inc. (NYSE:INVH), Varian Medical Systems, Inc. (NYSE:VAR), Ventas, Inc. (NYSE:VTR), and Dover Corporation (NYSE:DOV). All of these stocks’ market caps resemble IP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TFX 40 753356 12
CBRE 24 1609802 -5
ANET 27 333863 -6
INVH 28 648119 -5
VAR 52 1699418 25
VTR 17 133406 -4
DOV 40 687494 0
Average 32.6 837923 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $838 million. That figure was $199 million in IP’s case. Varian Medical Systems, Inc. (NYSE:VAR) is the most popular stock in this table. On the other hand Ventas, Inc. (NYSE:VTR) is the least popular one with only 17 bullish hedge fund positions. International Paper Company (NYSE:IP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for IP is 57.7. 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. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on IP as the stock returned 24.6% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.

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