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In this article we will check out the progression of hedge fund sentiment towards Southwestern Energy Company (NYSE:SWN) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Southwestern Energy Company (NYSE:SWN) investors should be aware of a decrease in hedge fund sentiment in recent months. Southwestern Energy Company (NYSE:SWN) was in 22 hedge funds' portfolios at the end of September. The all time high for this statistic is 48. There were 27 hedge funds in our database with SWN holdings at the end of June. Our calculations also showed that SWN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we're going to review the recent hedge fund action surrounding Southwestern Energy Company (NYSE:SWN).
David Iben of Kopernik Global Investors
Do Hedge Funds Think SWN Is A Good Stock To Buy Now?
At third quarter's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in SWN a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Kopernik Global Investors, managed by David Iben, holds the most valuable position in Southwestern Energy Company (NYSE:SWN). Kopernik Global Investors has a $97.9 million position in the stock, comprising 11% of its 13F portfolio. Coming in second is D E Shaw, led by D. E. Shaw, holding a $53.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers with similar optimism encompass Israel Englander's Millennium Management, Steve Cohen's Point72 Asset Management and Ken Fisher's Fisher Asset Management. In terms of the portfolio weights assigned to each position Corriente Advisors allocated the biggest weight to Southwestern Energy Company (NYSE:SWN), around 16.58% of its 13F portfolio. Kopernik Global Investors is also relatively very bullish on the stock, setting aside 10.99 percent of its 13F equity portfolio to SWN.
Due to the fact that Southwestern Energy Company (NYSE:SWN) has faced falling interest from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers who were dropping their positions entirely last quarter. Interestingly, Vince Maddi and Shawn Brennan's SIR Capital Management cut the largest position of the 750 funds followed by Insider Monkey, totaling close to $3.3 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dumped about $3.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Southwestern Energy Company (NYSE:SWN). We will take a look at Colliers International Group Inc (NASDAQ:CIGI), Maravai LifeSciences Holdings, Inc. (NASDAQ:MRVI), Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR), Paysafe Limited (NYSE:PSFE), Luminar Technologies, Inc. (NASDAQ:LAZR), Goosehead Insurance, Inc. (NASDAQ:GSHD), and Pacific Biosciences of California, Inc. (NASDAQ:PACB). This group of stocks' market caps match SWN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIGI,16,726941,-1 MRVI,34,1068071,14 ASR,2,23593,-3 PSFE,42,597243,-8 LAZR,12,111108,-9 GSHD,13,210178,-1 PACB,27,1341476,-1 Average,20.9,582659,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $583 million. That figure was $264 million in SWN's case. Paysafe Limited (NYSE:PSFE) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste, S. A. B. de C. V. (NYSE:ASR) is the least popular one with only 2 bullish hedge fund positions. Southwestern Energy Company (NYSE:SWN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SWN is 38.8. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately SWN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SWN were disappointed as the stock returned -15.9% since the end of September (through 12/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.