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Should You Buy The Cooper Companies, Inc. (COO)?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Hedge fund interest in The Cooper Companies, Inc. (NYSE:COO) shares was flat at the end of last quarter. This is usually a negative indicator. 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 E*TRADE Financial Corporation (NASDAQ:ETFC), Arthur J. Gallagher & Co. (NYSE:AJG), and TransUnion (NYSE:TRU) to gather more data points.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Blood

We’re going to take a glance at the fresh hedge fund action regarding The Cooper Companies, Inc. (NYSE:COO).

How have hedgies been trading The Cooper Companies, Inc. (NYSE:COO)?

At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, no change from one quarter earlier. The graph below displays the number of hedge funds with bullish position in COO over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with COO Positions

Among these funds, Generation Investment Management held the most valuable stake in The Cooper Companies, Inc. (NYSE:COO), which was worth $911.9 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $51.5 million worth of shares. Moreover, Citadel Investment Group, Fisher Asset Management, and Alyeska Investment Group were also bullish on The Cooper Companies, Inc. (NYSE:COO), allocating a large percentage of their portfolios to this stock.

Since The Cooper Companies, Inc. (NYSE:COO) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that D. E. Shaw’s D E Shaw sold off the biggest investment of the 700 funds followed by Insider Monkey, valued at about $2.4 million in stock. Vishal Saluja and Pham Quang’s fund, Endurant Capital Management, also sold off its stock, about $2.2 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to The Cooper Companies, Inc. (NYSE:COO). We will take a look at E*TRADE Financial Corporation (NASDAQ:ETFC), Arthur J. Gallagher & Co. (NYSE:AJG), TransUnion (NYSE:TRU), and C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). This group of stocks’ market valuations are similar to COO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ETFC 36 1474790 4
AJG 26 380676 4
TRU 29 1758803 0
CHRW 28 457937 -2
Average 29.75 1018052 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.02 billion. That figure was $1.13 billion in COO’s case. E*TRADE Financial Corporation (NASDAQ:ETFC) is the most popular stock in this table. On the other hand Arthur J. Gallagher & Co. (NYSE:AJG) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks The Cooper Companies, Inc. (NYSE:COO) is even less popular than AJG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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