Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards QEP Resources Inc (NYSE:QEP) to find out whether there were any major changes in hedge funds’ views.
Is QEP a good stock to buy now? QEP Resources Inc (NYSE:QEP) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 34. QEP has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 19 hedge funds in our database with QEP holdings at the end of June. Our calculations also showed that QEP 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.
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 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding QEP Resources Inc (NYSE:QEP).
Do Hedge Funds Think QEP Is A Good Stock To Buy Now?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in QEP a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
The largest stake in QEP Resources Inc (NYSE:QEP) was held by Adage Capital Management, which reported holding $3.9 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $3.7 million position. Other investors bullish on the company included Aristeia Capital, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Aristeia Capital allocated the biggest weight to QEP Resources Inc (NYSE:QEP), around 0.15% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.05 percent of its 13F equity portfolio to QEP.
Due to the fact that QEP Resources Inc (NYSE:QEP) has experienced falling interest from hedge fund managers, we can see that there is a sect of funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Noam Gottesman’s GLG Partners dropped the biggest stake of the 750 funds watched by Insider Monkey, worth about $0.6 million in stock, and Cliff Asness’s AQR Capital Management was right behind this move, as the fund sold off about $0.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as QEP Resources Inc (NYSE:QEP) but similarly valued. These stocks are Ryerson Holding Corporation (NYSE:RYI), Fulcrum Therapeutics, Inc. (NASDAQ:FULC), Houghton Mifflin Harcourt Co (NASDAQ:HMHC), P.A.M. Transportation Services, Inc. (NASDAQ:PTSI), Transcat, Inc. (NASDAQ:TRNS), Accuray Incorporated (NASDAQ:ARAY), and Home Bancorp, Inc. (NASDAQ:HBCP). This group of stocks’ market caps are similar to QEP’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 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $22 million in QEP’s case. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) is the most popular stock in this table. On the other hand P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) is the least popular one with only 1 bullish hedge fund positions. QEP Resources Inc (NYSE:QEP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QEP is 53. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on QEP as the stock returned 163.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.