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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Canadian Natural Resources Limited (NYSE:CNQ).
Is Canadian Natural Resources Limited (NYSE:CNQ) ready to rally soon? The best stock pickers were selling. The number of bullish hedge fund bets were cut by 2 recently. Canadian Natural Resources Limited (NYSE:CNQ) was in 27 hedge funds' portfolios at the end of June. The all time high for this statistic is 34. Our calculations also showed that CNQ isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 29 hedge funds in our database with CNQ holdings at the end of March.
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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
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Do Hedge Funds Think CNQ Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the first quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in CNQ a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Donald Yacktman's Yacktman Asset Management has the biggest position in Canadian Natural Resources Limited (NYSE:CNQ), worth close to $463.3 million, comprising 4.5% of its total 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $47.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism comprise D. E. Shaw's D E Shaw, Noam Gottesman's GLG Partners and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors. In terms of the portfolio weights assigned to each position Elm Ridge Capital allocated the biggest weight to Canadian Natural Resources Limited (NYSE:CNQ), around 5.36% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, earmarking 4.5 percent of its 13F equity portfolio to CNQ.
Since Canadian Natural Resources Limited (NYSE:CNQ) has faced a decline in interest from the aggregate hedge fund industry, it's easy to see that there is a sect of hedgies that elected to cut their full holdings last quarter. At the top of the heap, Brandon Haley's Holocene Advisors said goodbye to the biggest position of the 750 funds watched by Insider Monkey, totaling an estimated $31.4 million in stock. Matthew Hulsizer's fund, PEAK6 Capital Management, also sold off its stock, about $1.3 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Canadian Natural Resources Limited (NYSE:CNQ) but similarly valued. These stocks are Simon Property Group, Inc (NYSE:SPG), Wipro Limited (NYSE:WIT), Aptiv PLC (NYSE:APTV), Centene Corporation (NYSE:CNC), Digital Realty Trust, Inc. (NYSE:DLR), American Electric Power Company, Inc. (NYSE:AEP), and Carrier Global Corporation (NYSE:CARR). All of these stocks' market caps resemble CNQ's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPG,37,666243,6 WIT,14,164007,1 APTV,40,1677761,-10 CNC,49,3240123,-4 DLR,30,424723,8 AEP,29,726241,-3 CARR,46,1853633,-5 Average,35,1250390,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1250 million. That figure was $777 million in CNQ's case. Centene Corporation (NYSE:CNC) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 14 bullish hedge fund positions. Canadian Natural Resources Limited (NYSE:CNQ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CNQ is 45.4. 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 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 still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on CNQ as the stock returned 18.3% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.