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Is HFC Stock A Buy or Sell?

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  • HFC

We at Insider Monkey have gone over 887 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 HollyFrontier Corporation (NYSE:HFC) based on that data.

Is HFC stock a buy? Hedge funds were becoming more confident. The number of long hedge fund positions advanced by 6 lately. HollyFrontier Corporation (NYSE:HFC) was in 34 hedge funds' portfolios at the end of December. The all time high for this statistic is 40. Our calculations also showed that HFC isn't among the 30 most popular stocks among hedge funds (click for Q4 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Michael Burry's New Stock Picks
Michael Burry's New Stock Picks

Michael Burry of Scion Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind we're going to take a peek at the new hedge fund action encompassing HollyFrontier Corporation (NYSE:HFC).

Do Hedge Funds Think HFC Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards HFC over the last 22 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of HollyFrontier Corporation (NYSE:HFC), with a stake worth $62.5 million reported as of the end of December. Trailing Arrowstreet Capital was D E Shaw, which amassed a stake valued at $42 million. Encompass Capital Advisors, Two Sigma Advisors, and Balyasny Asset Management 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 Scion Asset Management allocated the biggest weight to HollyFrontier Corporation (NYSE:HFC), around 2.88% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, setting aside 2.3 percent of its 13F equity portfolio to HFC.

Now, some big names have jumped into HollyFrontier Corporation (NYSE:HFC) headfirst. Scion Asset Management, managed by Michael Burry, created the biggest position in HollyFrontier Corporation (NYSE:HFC). Scion Asset Management had $6.5 million invested in the company at the end of the quarter. Mark Coe's Intrinsic Edge Capital also initiated a $3.9 million position during the quarter. The following funds were also among the new HFC investors: Renaissance Technologies, William Harnisch's Peconic Partners LLC, and Paul Marshall and Ian Wace's Marshall Wace LLP.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as HollyFrontier Corporation (NYSE:HFC) but similarly valued. These stocks are PNM Resources, Inc. (NYSE:PNM), PTC Therapeutics, Inc. (NASDAQ:PTCT), LivePerson, Inc. (NASDAQ:LPSN), Novanta Inc. (NASDAQ:NOVT), JBG SMITH Properties (NYSE:JBGS), New Residential Investment Corp (NYSE:NRZ), and Spirit AeroSystems Holdings, Inc. (NYSE:SPR). All of these stocks' market caps are similar to HFC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PNM,30,1010717,7 PTCT,23,260701,-2 LPSN,35,311985,9 NOVT,18,93291,-1 JBGS,16,241480,-1 NRZ,22,121965,1 SPR,41,996344,10 Average,26.4,433783,3.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $269 million in HFC's case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand JBG SMITH Properties (NYSE:JBGS) is the least popular one with only 16 bullish hedge fund positions. HollyFrontier Corporation (NYSE:HFC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HFC is 71.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on HFC as the stock returned 48.4% since the end of Q4 (through 4/1) 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.

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