We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards The Cooper Companies, Inc. (NYSE:COO).
Is The Cooper Companies, Inc. (NYSE:COO) a splendid investment now? The best stock pickers were becoming less hopeful. The number of long hedge fund positions were trimmed by 10 recently. The Cooper Companies, Inc. (NYSE:COO) was in 33 hedge funds' portfolios at the end of June. The all time high for this statistic is 43. Our calculations also showed that COO isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 43 hedge funds in our database with COO holdings at the end of March.
At the moment there are numerous signals market participants have at their disposal to assess stocks. Some of the most innovative signals are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform the broader indices by a very impressive margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
David Blood of Generation Investment Management
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Do Hedge Funds Think COO Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in COO over the last 24 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Generation Investment Management was the largest shareholder of The Cooper Companies, Inc. (NYSE:COO), with a stake worth $642.1 million reported as of the end of June. Trailing Generation Investment Management was Two Sigma Advisors, which amassed a stake valued at $84.6 million. Intermede Investment Partners, Woodline Partners, and Polar Capital 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 Generation Investment Management allocated the biggest weight to The Cooper Companies, Inc. (NYSE:COO), around 2.66% of its 13F portfolio. Intermede Investment Partners is also relatively very bullish on the stock, setting aside 1.67 percent of its 13F equity portfolio to COO.
Because The Cooper Companies, Inc. (NYSE:COO) has witnessed a decline in interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of hedgies who sold off their entire stakes by the end of the second quarter. At the top of the heap, Arthur B Cohen and Joseph Healey's Healthcor Management LP said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, comprising about $43.5 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund cut about $42.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 10 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to The Cooper Companies, Inc. (NYSE:COO). These stocks are Essex Property Trust Inc (NYSE:ESS), Teledyne Technologies Incorporated (NYSE:TDY), ORIX Corporation (NYSE:IX), Sun Communities Inc (NYSE:SUI), Plug Power, Inc. (NASDAQ:PLUG), Regions Financial Corporation (NYSE:RF), and Cenovus Energy Inc (NYSE:CVE). This group of stocks' market caps are closest to COO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESS,21,281090,-9 TDY,36,1440654,5 IX,4,4271,-1 SUI,30,821616,-5 PLUG,34,878412,9 RF,33,242962,1 CVE,32,562772,9 Average,27.1,604540,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $605 million. That figure was $1150 million in COO's case. Teledyne Technologies Incorporated (NYSE:TDY) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. The Cooper Companies, Inc. (NYSE:COO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COO is 63.3. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately COO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on COO were disappointed as the stock returned 0.5% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.