It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Occidental Petroleum Corporation (NYSE:OXY).
Is Occidental Petroleum Corporation (NYSE:OXY) a good stock to buy now? Hedge funds are becoming hopeful. The number of bullish hedge fund bets went up by 15 in recent months. Our calculations also showed that OXY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most traders, hedge funds are viewed as worthless, old investment tools of the past. While there are more than 8000 funds with their doors open today, We choose to focus on the top tier of this club, around 750 funds. These investment experts manage most of the hedge fund industry's total capital, and by keeping track of their matchless equity investments, Insider Monkey has unearthed many investment strategies that have historically exceeded the broader indices. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_25910" align="aligncenter" width="467"] Carl Icahn of Icahn Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a peek at the key hedge fund action surrounding Occidental Petroleum Corporation (NYSE:OXY).
What have hedge funds been doing with Occidental Petroleum Corporation (NYSE:OXY)?
At the end of the third quarter, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OXY over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Carl Icahn's Icahn Capital has the largest position in Occidental Petroleum Corporation (NYSE:OXY), worth close to $1.171 billion, amounting to 4.6% of its total 13F portfolio. On Icahn Capital's heels is Berkshire Hathaway, managed by Warren Buffett, which holds a $332.1 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain John Overdeck and David Siegel's Two Sigma Advisors, John Murphy's Levin Easterly Partners and Kenneth Mario Garschina's Mason Capital Management. In terms of the portfolio weights assigned to each position Mason Capital Management allocated the biggest weight to Occidental Petroleum Corporation (NYSE:OXY), around 32.17% of its portfolio. One Fin Capital Management is also relatively very bullish on the stock, setting aside 4.65 percent of its 13F equity portfolio to OXY.
As one would reasonably expect, some big names were leading the bulls' herd. Berkshire Hathaway, managed by Warren Buffett, initiated the biggest position in Occidental Petroleum Corporation (NYSE:OXY). Berkshire Hathaway had $332.1 million invested in the company at the end of the quarter. Matt Smith's Deep Basin Capital also initiated a $83.8 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace, Michael A. Price and Amos Meron's Empyrean Capital Partners, and Till Bechtolsheimer's Arosa Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Occidental Petroleum Corporation (NYSE:OXY) but similarly valued. We will take a look at Ross Stores, Inc. (NASDAQ:ROST), Constellation Brands, Inc. (NYSE:STZ), Telefonica S.A. (NYSE:TEF), and ICICI Bank Limited (NYSE:IBN). All of these stocks' market caps resemble OXY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROST,39,1067484,7 STZ,41,1671280,3 TEF,5,34830,-2 IBN,26,849426,-3 Average,27.75,905755,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $906 million. That figure was $2774 million in OXY's case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Occidental Petroleum Corporation (NYSE:OXY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OXY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on OXY were disappointed as the stock returned -13.3% during the first two months of the fourth 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 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.