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Hedge Fund Consensus Stocks vs. Noble Energy, Inc. (NBL) In 2019

Nina Todic

Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.1% in 2019 (through December 23) and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards Noble Energy, Inc. (NYSE:NBL) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.

Noble Energy, Inc. (NYSE:NBL) was in 28 hedge funds' portfolios at the end of the third quarter of 2019. NBL has seen an increase in enthusiasm from smart money in recent months. There were 25 hedge funds in our database with NBL positions at the end of the previous quarter. Our calculations also showed that NBL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_340081" align="aligncenter" width="450"] Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a glance at the recent hedge fund action surrounding Noble Energy, Inc. (NYSE:NBL).

What does smart money think about Noble Energy, Inc. (NYSE:NBL)?

At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NBL over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Noble Energy, Inc. (NYSE:NBL) was held by Adage Capital Management, which reported holding $198 million worth of stock at the end of September. It was followed by Millennium Management with a $192.7 million position. Other investors bullish on the company included Citadel Investment Group, Holocene Advisors, and First Pacific Advisors. In terms of the portfolio weights assigned to each position Cobalt Capital Management allocated the biggest weight to Noble Energy, Inc. (NYSE:NBL), around 3.12% of its 13F portfolio. Yaupon Capital is also relatively very bullish on the stock, designating 2.37 percent of its 13F equity portfolio to NBL.

Consequently, specific money managers have jumped into Noble Energy, Inc. (NYSE:NBL) headfirst. Holocene Advisors, managed by Brandon Haley, established the largest position in Noble Energy, Inc. (NYSE:NBL). Holocene Advisors had $12.7 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky's Waratah Capital Advisors also initiated a $9.6 million position during the quarter. The following funds were also among the new NBL investors: Steve Pattyn's Yaupon Capital, Michael Kharitonov and Jon David McAuliffe's Voleon Capital, and BP Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Noble Energy, Inc. (NYSE:NBL) but similarly valued. We will take a look at CF Industries Holdings, Inc. (NYSE:CF), Sasol Limited (NYSE:SSL), Lamb Weston Holdings, Inc. (NYSE:LW), and UGI Corporation (NYSE:UGI). This group of stocks' market values are closest to NBL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CF,39,956283,4 SSL,8,26026,0 LW,33,438896,4 UGI,19,317167,-1 Average,24.75,434593,1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $435 million. That figure was $603 million in NBL's case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 8 bullish hedge fund positions. Noble Energy, Inc. (NYSE:NBL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on NBL, though not to the same extent, as the stock returned 32.4% during 2019 (as of 12/23) and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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