Is WPX Energy Inc (NYSE:WPX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
WPX Energy Inc (NYSE:WPX) investors should be aware of a decrease in support from the world's most elite money managers in recent months. WPX was in 42 hedge funds' portfolios at the end of March. There were 46 hedge funds in our database with WPX holdings at the end of the previous quarter. Our calculations also showed that WPX isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a look at the key hedge fund action surrounding WPX Energy Inc (NYSE:WPX).
How are hedge funds trading WPX Energy Inc (NYSE:WPX)?
At Q1's end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in WPX over the last 15 quarters. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in WPX Energy Inc (NYSE:WPX), which was worth $172.8 million at the end of the first quarter. On the second spot was Adage Capital Management which amassed $105 million worth of shares. Moreover, Peconic Partners LLC, Deep Basin Capital, and Omega Advisors were also bullish on WPX Energy Inc (NYSE:WPX), allocating a large percentage of their portfolios to this stock.
Since WPX Energy Inc (NYSE:WPX) has faced declining sentiment from the smart money, it's easy to see that there were a few hedgies that slashed their entire stakes in the third quarter. It's worth mentioning that Daniel Arbess's Perella Weinberg Partners said goodbye to the biggest investment of the "upper crust" of funds tracked by Insider Monkey, totaling about $64.3 million in stock. Till Bechtolsheimer's fund, Arosa Capital Management, also sold off its stock, about $14.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 4 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to WPX Energy Inc (NYSE:WPX). These stocks are Algonquin Power & Utilities Corp. (NYSE:AQN), Grand Canyon Education Inc (NASDAQ:LOPE), BlackBerry Limited (NYSE:BB), and Elbit Systems Ltd. (NASDAQ:ESLT). This group of stocks' market valuations match WPX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AQN,12,54770,3 LOPE,26,151266,5 BB,23,667193,0 ESLT,2,13053,-1 Average,15.75,221571,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $222 million. That figure was $794 million in WPX's case. Grand Canyon Education Inc (NASDAQ:LOPE) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks WPX Energy Inc (NYSE:WPX) is more popular among hedge funds. 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. Unfortunately WPX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on WPX were disappointed as the stock returned -16.6% during the same 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 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.