At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards HollyFrontier Corporation (NYSE:HFC).
HollyFrontier Corporation (NYSE:HFC) has experienced a decrease in hedge fund interest of late. HFC was in 24 hedge funds' portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with HFC holdings at the end of the previous quarter. Our calculations also showed that HFC isn't among the 30 most popular stocks among hedge funds (click for Q1 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To most shareholders, hedge funds are assumed to be slow, outdated investment vehicles of the past. While there are greater than 8000 funds in operation at the moment, Our researchers look at the crème de la crème of this group, approximately 850 funds. Most estimates calculate that this group of people direct bulk of all hedge funds' total capital, and by observing their matchless investments, Insider Monkey has determined various investment strategies that have historically outrun the market. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_746830" align="aligncenter" width="400"] Matthew Hulsizer of PEAK6 Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the fresh hedge fund action regarding HollyFrontier Corporation (NYSE:HFC).
How are hedge funds trading HollyFrontier Corporation (NYSE:HFC)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards HFC over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of HollyFrontier Corporation (NYSE:HFC), with a stake worth $64.5 million reported as of the end of September. Trailing AQR Capital Management was Citadel Investment Group, which amassed a stake valued at $34.1 million. D E Shaw, Two Sigma Advisors, and GLG Partners 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 1.86% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.79 percent of its 13F equity portfolio to HFC.
Seeing as HollyFrontier Corporation (NYSE:HFC) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of fund managers that decided to sell off their positions entirely last quarter. At the top of the heap, David Harding's Winton Capital Management dumped the largest stake of the 750 funds watched by Insider Monkey, totaling close to $7.2 million in stock, and Sara Nainzadeh's Centenus Global Management was right behind this move, as the fund sold off about $5.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to HollyFrontier Corporation (NYSE:HFC). We will take a look at Telecom Argentina S.A. (NYSE:TEO), Mercury Systems Inc (NASDAQ:MRCY), RLI Corp. (NYSE:RLI), and Five Below Inc (NASDAQ:FIVE). This group of stocks' market valuations resemble HFC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEO,4,32332,-1 MRCY,12,47030,-12 RLI,15,192969,-10 FIVE,31,404860,-11 Average,15.5,169298,-8.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $204 million in HFC's case. Five Below Inc (NASDAQ:FIVE) is the most popular stock in this table. On the other hand Telecom Argentina S.A. (NYSE:TEO) is the least popular one with only 4 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 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on HFC as the stock returned 41.2% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.