Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Royal Dutch Shell plc (NYSE:RDS-A) from the perspective of those elite funds.
Royal Dutch Shell plc (NYSE:RDS-A) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds' portfolios at the end of March. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Bank of America Corporation (NYSE:BAC), The Procter & Gamble Company (NYSE:PG), and Verizon Communications Inc. (NYSE:VZ) to gather more data points.
In today’s marketplace there are plenty of methods market participants put to use to analyze stocks. A duo of the most useful methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the broader indices by a solid margin (see the details here).
We're going to analyze the latest hedge fund action surrounding Royal Dutch Shell plc (NYSE:RDS).
How have hedgies been trading Royal Dutch Shell plc (NYSE:RDS)?
At Q1's end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards RDS over the last 15 quarters. With the smart money's sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ken Fisher's Fisher Asset Management has the largest position in Royal Dutch Shell plc (NYSE:RDS), worth close to $739.9 million, accounting for 1% of its total 13F portfolio. On Fisher Asset Management's heels is Richard S. Pzena of Pzena Investment Management, with a $226.8 million position; 1.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish encompass William B. Gray's Orbis Investment Management, Jim Simons's Renaissance Technologies and Israel Englander's Millennium Management.
Because Royal Dutch Shell plc (NYSE:RDS) has witnessed a decline in interest from the smart money, we can see that there were a few hedgies who were dropping their full holdings last quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group cut the largest stake of the 700 funds tracked by Insider Monkey, worth about $39.8 million in stock. Sara Nainzadeh's fund, Centenus Global Management, also dumped its stock, about $8.2 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Royal Dutch Shell plc (NYSE:RDS). These stocks are Bank of America Corporation (NYSE:BAC), The Procter & Gamble Company (NYSE:PG), Verizon Communications Inc. (NYSE:VZ), and Mastercard Incorporated (NYSE:MA). This group of stocks' market valuations are closest to RDS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAC,96,29064383,-3 PG,56,9567973,-4 VZ,52,1472781,-10 MA,94,11561189,-2 Average,74.5,12916582,-4.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 74.5 hedge funds with bullish positions and the average amount invested in these stocks was $12917 million. That figure was $1708 million in RDS's case. Bank of America Corporation (NYSE:BAC) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 52 bullish hedge fund positions. Compared to these stocks Royal Dutch Shell plc (NYSE:RDS) is even less popular than VZ. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on RDS, though not to the same extent, as the stock returned 1% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.