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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 Canadian Natural Resources Limited (NYSE:CNQ) to find out whether there were any major changes in hedge funds' views.
Is CNQ stock a buy? Hedge funds were turning less bullish. The number of long hedge fund bets fell by 1 lately. Canadian Natural Resources Limited (NYSE:CNQ) was in 29 hedge funds' portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings). There were 30 hedge funds in our database with CNQ positions at the end of the third quarter.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Ian Wace of Marshall Wace
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Do Hedge Funds Think CNQ Is A Good Stock To Buy Now?
At Q4's end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CNQ over the last 22 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, Holocene Advisors, managed by Brandon Haley, holds the largest position in Canadian Natural Resources Limited (NYSE:CNQ). Holocene Advisors has a $82.1 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is Point72 Asset Management, led by Steve Cohen, holding a $56.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism encompass Noam Gottesman's GLG Partners, Todd J. Kantor's Encompass Capital Advisors and Ryan Tolkin (CIO)'s Schonfeld Strategic 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 6.61% of its 13F portfolio. NewGen Asset Management is also relatively very bullish on the stock, dishing out 5.26 percent of its 13F equity portfolio to CNQ.
Seeing as Canadian Natural Resources Limited (NYSE:CNQ) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedge funds who were dropping their positions entirely by the end of the fourth quarter. Intriguingly, Jonathan Barrett and Paul Segal's Luminus Management sold off the largest investment of the 750 funds followed by Insider Monkey, comprising close to $21.1 million in stock. Clint Carlson's fund, Carlson Capital, also dropped its stock, about $13.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds by the end of the fourth quarter.
Let's check out hedge fund activity in other stocks similar to Canadian Natural Resources Limited (NYSE:CNQ). We will take a look at Archer Daniels Midland Company (NYSE:ADM), Fastenal Company (NASDAQ:FAST), Simon Property Group, Inc (NYSE:SPG), McKesson Corporation (NYSE:MCK), AMETEK, Inc. (NYSE:AME), American Water Works Company, Inc. (NYSE:AWK), and Discover Financial Services (NYSE:DFS). 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 ADM,35,703261,9 FAST,30,612311,-8 SPG,32,353434,7 MCK,51,1768164,-3 AME,31,956468,-6 AWK,36,958304,5 DFS,43,729763,-4 Average,36.9,868815,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $869 million. That figure was $341 million in CNQ's case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Fastenal Company (NASDAQ:FAST) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Canadian Natural Resources Limited (NYSE:CNQ) is even less popular than FAST. Our overall hedge fund sentiment score for CNQ is 29.6. 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. Hedge funds clearly dropped the ball on CNQ as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on CNQ as the stock returned 28.8% since Q4 (through April 12th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.