The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Valero Energy Corporation (NYSE:VLO) and determine whether the smart money was really smart about this stock.
Valero Energy Corporation (NYSE:VLO) has seen a decrease in hedge fund interest of late. Valero Energy Corporation (NYSE:VLO) was in 39 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 56. There were 45 hedge funds in our database with VLO holdings at the end of March. Our calculations also showed that VLO 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.
To most shareholders, hedge funds are assumed to be underperforming, outdated financial tools of the past. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the moguls of this club, about 850 funds. These money managers command the lion's share of all hedge funds' total asset base, and by watching their first-class stock picks, Insider Monkey has unearthed a few investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Cliff Asness of AQR Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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. 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. 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. With all of this in mind let's take a glance at the recent hedge fund action encompassing Valero Energy Corporation (NYSE:VLO).
What does smart money think about Valero Energy Corporation (NYSE:VLO)?
At the end of the second quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 35 hedge funds with a bullish position in VLO 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.
The largest stake in Valero Energy Corporation (NYSE:VLO) was held by Citadel Investment Group, which reported holding $27.2 million worth of stock at the end of September. It was followed by AQR Capital Management with a $22.3 million position. Other investors bullish on the company included Laurion Capital Management, Millennium Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Beech Hill Partners allocated the biggest weight to Valero Energy Corporation (NYSE:VLO), around 1.66% of its 13F portfolio. Swift Run Capital Management is also relatively very bullish on the stock, earmarking 0.67 percent of its 13F equity portfolio to VLO.
Judging by the fact that Valero Energy Corporation (NYSE:VLO) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of money managers that elected to cut their entire stakes last quarter. It's worth mentioning that Brandon Haley's Holocene Advisors said goodbye to the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at about $40.1 million in stock. Crispin Odey's fund, Odey Asset Management Group, also said goodbye to its stock, about $24 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 6 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Valero Energy Corporation (NYSE:VLO) but similarly valued. These stocks are Xilinx, Inc. (NASDAQ:XLNX), TransDigm Group Incorporated (NYSE:TDG), McCormick & Company, Incorporated (NYSE:MKC), Verisign, Inc. (NASDAQ:VRSN), Moderna, Inc. (NASDAQ:MRNA), Motorola Solutions Inc (NYSE:MSI), and V.F. Corporation (NYSE:VFC). This group of stocks' market values resemble VLO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XLNX,47,1054542,9 TDG,62,6065530,4 MKC,32,251773,1 VRSN,47,6245654,6 MRNA,37,788433,12 MSI,36,535822,2 VFC,27,558958,8 Average,41.1,2214387,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.1 hedge funds with bullish positions and the average amount invested in these stocks was $2214 million. That figure was $157 million in VLO's case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand V.F. Corporation (NYSE:VFC) is the least popular one with only 27 bullish hedge fund positions. Valero Energy Corporation (NYSE:VLO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VLO is 37. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market by 23.2 percentage points. Unfortunately VLO wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); VLO investors were disappointed as the stock returned -9% since Q2 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.