Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Halliburton Company (NYSE:HAL).
Is Halliburton Company (NYSE:HAL) ready to rally soon? Money managers are taking a pessimistic view. The number of long hedge fund bets went down by 5 recently. Our calculations also showed that HAL isn't among the 30 most popular stocks among hedge funds.
To most traders, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds trading today, Our researchers look at the moguls of this club, about 750 funds. These hedge fund managers direct the lion's share of the hedge fund industry's total asset base, and by paying attention to their finest picks, Insider Monkey has unsheathed a few investment strategies that have historically outstripped the broader indices. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the new hedge fund action surrounding Halliburton Company (NYSE:HAL).
How have hedgies been trading Halliburton Company (NYSE:HAL)?
At Q2's end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. By comparison, 44 hedge funds held shares or bullish call options in HAL a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pzena Investment Management held the most valuable stake in Halliburton Company (NYSE:HAL), which was worth $536.5 million at the end of the second quarter. On the second spot was Two Sigma Advisors which amassed $85.3 million worth of shares. Moreover, Fisher Asset Management, D E Shaw, and AQR Capital Management were also bullish on Halliburton Company (NYSE:HAL), allocating a large percentage of their portfolios to this stock.
Because Halliburton Company (NYSE:HAL) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of hedgies that elected to cut their full holdings by the end of the second quarter. Intriguingly, Renaissance Technologies dropped the largest investment of all the hedgies tracked by Insider Monkey, valued at about $43.1 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dropped its stock, about $10.7 million worth. These moves are important to note, as total hedge fund interest dropped by 5 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Halliburton Company (NYSE:HAL). These stocks are Weyerhaeuser Company (NYSE:WY), Palo Alto Networks Inc (NYSE:PANW), The Clorox Company (NYSE:CLX), and Essex Property Trust Inc (NYSE:ESS). All of these stocks' market caps are closest to HAL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WY,28,415491,3 PANW,45,2343774,1 CLX,28,1011768,-1 ESS,19,508070,3 Average,30,1069776,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1070 million. That figure was $935 million in HAL's case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand Essex Property Trust Inc (NYSE:ESS) is the least popular one with only 19 bullish hedge fund positions. Halliburton Company (NYSE:HAL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HAL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HAL were disappointed as the stock returned -16.3% during the third 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.