You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Ecopetrol S.A. (NYSE:EC) has seen a decrease in enthusiasm from smart money lately. EC was in 15 hedge funds' portfolios at the end of March. There were 16 hedge funds in our database with EC positions at the end of the previous quarter. Our calculations also showed that EC isn't among the 30 most popular stocks among hedge funds.
Today there are tons of signals market participants use to appraise stocks. Two of the less utilized signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can beat the market by a superb margin (see the details here).
[caption id="attachment_758442" align="aligncenter" width="450"] Michael Platt of Bluecrest Capital Management[/caption]
We're going to view the key hedge fund action encompassing Ecopetrol S.A. (NYSE:EC).
How are hedge funds trading Ecopetrol S.A. (NYSE:EC)?
Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 8 hedge funds with a bullish position in EC a year ago. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ecopetrol S.A. (NYSE:EC), which was worth $145.7 million at the end of the first quarter. On the second spot was Fisher Asset Management which amassed $37 million worth of shares. Moreover, Point72 Asset Management, Arrowstreet Capital, and DSAM Partners were also bullish on Ecopetrol S.A. (NYSE:EC), allocating a large percentage of their portfolios to this stock.
Since Ecopetrol S.A. (NYSE:EC) has faced declining sentiment from the smart money, it's safe to say that there lies a certain "tier" of hedge funds that slashed their full holdings by the end of the third quarter. Interestingly, Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest investment of the 700 funds monitored by Insider Monkey, comprising about $1.9 million in stock. Noam Gottesman's fund, GLG Partners, also sold off its stock, about $1.1 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Ecopetrol S.A. (NYSE:EC) but similarly valued. These stocks are JD.Com Inc (NASDAQ:JD), Telefonica S.A. (NYSE:TEF), Phillips 66 (NYSE:PSX), and Intercontinental Exchange Inc (NYSE:ICE). This group of stocks' market valuations are closest to EC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JD,48,4342319,14 TEF,10,39168,4 PSX,43,1601311,-4 ICE,35,1777571,-6 Average,34,1940092,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1940 million. That figure was $233 million in EC's case. JD.Com Inc (NASDAQ:JD) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 10 bullish hedge fund positions. Ecopetrol S.A. (NYSE:EC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately EC wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EC investors were disappointed as the stock returned -9.8% during the same time period 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 among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.