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Hedge Funds Cashing Out Of Canadian Natural Resources Limited (CNQ)

Abigail Fisher

In this article you are going to find out whether hedge funds think Canadian Natural Resources Limited (NYSE:CNQ) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Canadian Natural Resources Limited (NYSE:CNQ) was in 26 hedge funds' portfolios at the end of March. CNQ has experienced a decrease in hedge fund sentiment of late. There were 29 hedge funds in our database with CNQ positions at the end of the previous quarter. Our calculations also showed that CNQ isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a multitude of indicators stock market investors can use to appraise publicly traded companies. Two of the less utilized indicators are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outperform their index-focused peers by a significant amount (see the details here).

[caption id="attachment_340081" align="aligncenter" width="396"] Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a glance at the latest hedge fund action encompassing Canadian Natural Resources Limited (NYSE:CNQ).

Hedge fund activity in Canadian Natural Resources Limited (NYSE:CNQ)

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CNQ over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, GMT Capital, managed by Thomas E. Claugus, holds the biggest position in Canadian Natural Resources Limited (NYSE:CNQ). GMT Capital has a $26.2 million position in the stock, comprising 1.5% of its 13F portfolio. On GMT Capital's heels is Point72 Asset Management, led by Steve Cohen, holding a $16.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money with similar optimism consist of John Overdeck and David Siegel's Two Sigma Advisors, Joseph Sirdevan's Galibier Capital Management and Ray Dalio's Bridgewater Associates. 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 9.93% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, setting aside 3.75 percent of its 13F equity portfolio to CNQ.

Due to the fact that Canadian Natural Resources Limited (NYSE:CNQ) has faced falling interest from hedge fund managers, logic holds that there lies a certain "tier" of money managers that slashed their entire stakes in the first quarter. It's worth mentioning that Vince Maddi and Shawn Brennan's SIR Capital Management sold off the largest position of the 750 funds monitored by Insider Monkey, worth about $21.1 million in stock, and Alex Snow's Lansdowne Partners was right behind this move, as the fund cut about $20.2 million worth. These moves are important to note, as aggregate hedge fund interest fell by 3 funds in the first quarter.

Let's now take a look at hedge fund activity in other stocks similar to Canadian Natural Resources Limited (NYSE:CNQ). We will take a look at Yum China Holdings, Inc. (NYSE:YUMC), Copart, Inc. (NASDAQ:CPRT), FleetCor Technologies, Inc. (NYSE:FLT), and Incyte Corporation (NASDAQ:INCY). All of these stocks' market caps are similar to CNQ's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YUMC,24,721412,-5 CPRT,48,732842,2 FLT,51,1655053,7 INCY,40,3325488,-6 Average,40.75,1608699,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.75 hedge funds with bullish positions and the average amount invested in these stocks was $1609 million. That figure was $107 million in CNQ's case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Yum China Holdings, Inc. (NYSE:YUMC) is the least popular one with only 24 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 calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on CNQ as the stock returned 33.6% during the second quarter and outperformed the market by an even larger margin.

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

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