Hedge Funds Have Never Been More Bullish On Helmerich & Payne, Inc. (HP)

Nina Todic

Mon, Oct 14, 2019, 6:59 PM

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Helmerich & Payne, Inc. (NYSE:HP)? The smart money sentiment can provide an answer to this question.

Helmerich & Payne, Inc. (NYSE:HP) investors should be aware of an increase in hedge fund sentiment of late. Our calculations also showed that HP isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's go over the key hedge fund action encompassing Helmerich & Payne, Inc. (NYSE:HP).

What have hedge funds been doing with Helmerich & Payne, Inc. (NYSE:HP)?

Heading into the third quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in HP over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey's hedge fund database, Ken Fisher's Fisher Asset Management has the number one position in Helmerich & Payne, Inc. (NYSE:HP), worth close to $73.4 million, comprising 0.1% of its total 13F portfolio. On Fisher Asset Management's heels is Point72 Asset Management, managed by Steve Cohen, which holds a $36.7 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Chuck Royce's Royce & Associates, John Overdeck and David Siegel's Two Sigma Advisors and Cliff Asness's AQR Capital Management.

As industrywide interest jumped, key hedge funds have jumped into Helmerich & Payne, Inc. (NYSE:HP) headfirst. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, created the biggest position in Helmerich & Payne, Inc. (NYSE:HP). SIR Capital Management had $11.7 million invested in the company at the end of the quarter. Robert Hockett's Covalent Capital Partners also initiated a $0.5 million position during the quarter. The other funds with brand new HP positions are Bruce Kovner's Caxton Associates LP, Mike Vranos's Ellington, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Helmerich & Payne, Inc. (NYSE:HP) but similarly valued. These stocks are PLDT Inc. (NYSE:PHI), Curtiss-Wright Corporation (NYSE:CW), LG Display Co Ltd. (NYSE:LPL), and Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI). This group of stocks' market values are similar to HP's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PHI,5,78595,0 CW,19,442818,-2 LPL,3,11105,-3 OLLI,31,257964,9 Average,14.5,197621,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $198 million. That figure was $321 million in HP's case. Ollie's Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Helmerich & Payne, Inc. (NYSE:HP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HP were disappointed as the stock returned -19.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks (view the video below) among hedge funds as many of these stocks already outperformed the market in Q3.