In this article we are going to use hedge fund sentiment as a tool and determine whether Hess Corporation (NYSE:HES) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is HES a good stock to buy now? Hess Corporation (NYSE:HES) was in 35 hedge funds' portfolios at the end of September. The all time high for this statistic is 41. HES has experienced an increase in activity from the world's largest hedge funds recently. There were 28 hedge funds in our database with HES positions at the end of the second quarter. Our calculations also showed that HES isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Minhua Zhang of Weld Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a look at the new hedge fund action encompassing Hess Corporation (NYSE:HES).
Do Hedge Funds Think HES Is A Good Stock To Buy Now?
At the end of September, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the second quarter of 2020. By comparison, 38 hedge funds held shares or bullish call options in HES a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Hess Corporation (NYSE:HES) was held by Fisher Asset Management, which reported holding $119.9 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $45.4 million position. Other investors bullish on the company included Caxton Associates LP, Citadel Investment Group, and Deep Basin Capital. In terms of the portfolio weights assigned to each position Caxton Associates LP allocated the biggest weight to Hess Corporation (NYSE:HES), around 4.37% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, earmarking 3.09 percent of its 13F equity portfolio to HES.
Now, some big names have jumped into Hess Corporation (NYSE:HES) headfirst. Deep Basin Capital, managed by Matt Smith, initiated the most valuable position in Hess Corporation (NYSE:HES). Deep Basin Capital had $25.2 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also initiated a $24.1 million position during the quarter. The other funds with brand new HES positions are Michael Gelband's ExodusPoint Capital, Paul Marshall and Ian Wace's Marshall Wace LLP, and Minhua Zhang's Weld Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Hess Corporation (NYSE:HES) but similarly valued. These stocks are Monolithic Power Systems, Inc. (NASDAQ:MPWR), Cloudflare, Inc. (NYSE:NET), Cincinnati Financial Corporation (NASDAQ:CINF), KB Financial Group, Inc. (NYSE:KB), Boston Properties, Inc. (NYSE:BXP), ABIOMED, Inc. (NASDAQ:ABMD), and Liberty Global plc (NASDAQ:LBTYA). This group of stocks' market valuations are closest to HES's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MPWR,37,753655,1 NET,44,541901,8 CINF,19,735839,-1 KB,6,36629,0 BXP,26,420101,-10 ABMD,25,878643,-6 LBTYA,35,1002893,6 Average,27.4,624237,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.4 hedge funds with bullish positions and the average amount invested in these stocks was $624 million. That figure was $380 million in HES's case. Cloudflare, Inc. (NYSE:NET) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 6 bullish hedge fund positions. Hess Corporation (NYSE:HES) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HES is 73.8. 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. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on HES as the stock returned 37.3% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.