We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards EOG Resources Inc (NYSE:EOG) and determine whether hedge funds skillfully traded this stock.
EOG Resources Inc (NYSE:EOG) was in 45 hedge funds' portfolios at the end of June. The all time high for this statistics is 60. EOG investors should be aware of an increase in activity from the world's largest hedge funds recently. There were 44 hedge funds in our database with EOG holdings at the end of March. Our calculations also showed that EOG isn't among the 30 most popular stocks among hedge funds (click for Q2 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 lot of metrics market participants use to appraise stocks. Some of the best metrics are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top fund managers can outperform the S&P 500 by a healthy amount (see the details here).
Steven Cohen of Point72 Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let's review the key hedge fund action surrounding EOG Resources Inc (NYSE:EOG).
How are hedge funds trading EOG Resources Inc (NYSE:EOG)?
At Q2's end, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards EOG over the last 20 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in EOG Resources Inc (NYSE:EOG) was held by Two Sigma Advisors, which reported holding $143.8 million worth of stock at the end of September. It was followed by Lyrical Asset Management with a $139.2 million position. Other investors bullish on the company included D E Shaw, AQR Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to EOG Resources Inc (NYSE:EOG), around 3.46% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, designating 2.74 percent of its 13F equity portfolio to EOG.
With a general bullishness amongst the heavyweights, specific money managers have jumped into EOG Resources Inc (NYSE:EOG) headfirst. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in EOG Resources Inc (NYSE:EOG). Point72 Asset Management had $37.5 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $36.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, Till Bechtolsheimer's Arosa Capital Management, and Mitch Cantor's Mountain Lake Investment Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as EOG Resources Inc (NYSE:EOG) but similarly valued. These stocks are Royalty Pharma plc (NASDAQ:RPRX), Seattle Genetics, Inc. (NASDAQ:SGEN), Synopsys, Inc. (NASDAQ:SNPS), Brown-Forman Corporation (NYSE:BF), Chipotle Mexican Grill, Inc. (NYSE:CMG), The Travelers Companies Inc (NYSE:TRV), and ZTO Express (Cayman) Inc. (NYSE:ZTO). This group of stocks' market caps are similar to EOG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RPRX,24,2716389,24 SGEN,38,8430115,11 SNPS,34,931266,3 BF,28,521945,0 CMG,41,3780591,-7 TRV,28,398629,-1 ZTO,18,715518,3 Average,30.1,2499208,4.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $2499 million. That figure was $696 million in EOG's case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks EOG Resources Inc (NYSE:EOG) is more popular among hedge funds. Our overall hedge fund sentiment score for EOG is 78.5. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately EOG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on EOG were disappointed as the stock returned -9.8% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.