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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 HollyFrontier Corporation (NYSE:HFC) to find out whether there were any major changes in hedge funds' views.
HollyFrontier Corporation (NYSE:HFC) investors should pay attention to an increase in hedge fund interest in recent months. HollyFrontier Corporation (NYSE:HFC) was in 30 hedge funds' portfolios at the end of June. The all time high for this statistic is 40. There were 20 hedge funds in our database with HFC holdings at the end of March. Our calculations also showed that HFC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's check out the key hedge fund action encompassing HollyFrontier Corporation (NYSE:HFC).
Do Hedge Funds Think HFC Is A Good Stock To Buy Now?
At the end of June, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in HFC a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in HollyFrontier Corporation (NYSE:HFC), which was worth $92.8 million at the end of the second quarter. On the second spot was D E Shaw which amassed $74.8 million worth of shares. Two Sigma Advisors, Point72 Asset Management, and Marshall Wace LLP were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Hi-Line Capital Management allocated the biggest weight to HollyFrontier Corporation (NYSE:HFC), around 1.4% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, dishing out 0.25 percent of its 13F equity portfolio to HFC.
Now, key money managers were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in HollyFrontier Corporation (NYSE:HFC). Point72 Asset Management had $22.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also made a $14.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ken Griffin's Citadel Investment Group, Michael Gelband's ExodusPoint Capital, and Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management.
Let's also examine hedge fund activity in other stocks similar to HollyFrontier Corporation (NYSE:HFC). We will take a look at SolarWinds Corporation (NYSE:SWI), Iridium Communications Inc. (NASDAQ:IRDM), Schrodinger, Inc. (NASDAQ:SDGR), Lancaster Colony Corporation (NASDAQ:LANC), Chart Industries, Inc. (NYSE:GTLS), JetBlue Airways Corporation (NASDAQ:JBLU), and Inovalon Holdings Inc (NASDAQ:INOV). This group of stocks' market values match HFC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SWI,21,1230054,-1 IRDM,18,705019,-4 SDGR,20,941274,3 LANC,18,294439,-4 GTLS,27,327346,8 JBLU,30,401724,1 INOV,20,145599,3 Average,22,577922,0.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $578 million. That figure was $319 million in HFC's case. JetBlue Airways Corporation (NASDAQ:JBLU) is the most popular stock in this table. On the other hand Iridium Communications Inc. (NASDAQ:IRDM) is the least popular one with only 18 bullish hedge fund positions. HollyFrontier Corporation (NYSE:HFC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HFC is 82.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on HFC as the stock returned 10.8% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.