We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Noble Energy, Inc. (NASDAQ:NBL) based on that data.
Noble Energy, Inc. (NASDAQ:NBL) was in 28 hedge funds' portfolios at the end of the fourth quarter of 2019. NBL has seen a decrease in support from the world's most elite money managers recently. There were 29 hedge funds in our database with NBL positions at the end of the previous quarter. Our calculations also showed that NBL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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. 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 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_255014" align="aligncenter" width="399"] Clint Carlson of Carlson Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to take a peek at the recent hedge fund action surrounding Noble Energy, Inc. (NASDAQ:NBL).
How are hedge funds trading Noble Energy, Inc. (NASDAQ:NBL)?
Heading into the first quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NBL over the last 18 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Noble Energy, Inc. (NASDAQ:NBL), with a stake worth $179.3 million reported as of the end of September. Trailing Citadel Investment Group was Adage Capital Management, which amassed a stake valued at $156.5 million. Point72 Asset Management, First Pacific Advisors LLC, and Carlson Capital 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 Cobalt Capital Management allocated the biggest weight to Noble Energy, Inc. (NASDAQ:NBL), around 2.09% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, designating 1.58 percent of its 13F equity portfolio to NBL.
Because Noble Energy, Inc. (NASDAQ:NBL) has faced bearish sentiment from hedge fund managers, logic holds that there is a sect of funds that slashed their entire stakes by the end of the third quarter. Interestingly, Brandon Haley's Holocene Advisors said goodbye to the largest position of the 750 funds tracked by Insider Monkey, worth close to $12.7 million in stock, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors was right behind this move, as the fund sold off about $9.6 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Noble Energy, Inc. (NASDAQ:NBL) but similarly valued. These stocks are The J.M. Smucker Company (NYSE:SJM), ASE Technology Holding Co., Ltd. (NYSE:ASX), Huazhu Group Limited (NASDAQ:HTHT), and VICI Properties Inc. (NYSE:VICI). All of these stocks' market caps match NBL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SJM,31,450185,3 ASX,10,231824,2 HTHT,18,258810,2 VICI,37,1826674,-3 Average,24,691873,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $692 million. That figure was $488 million in NBL's case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 10 bullish hedge fund positions. Noble Energy, Inc. (NASDAQ:NBL) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. Unfortunately NBL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on NBL were disappointed as the stock returned -78.8% during the same time period 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 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.