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Oakmark Funds Retain a Position in ConocoPhillips (COP) After it Acquired Concho Resources

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Jose Karlo Mari Tottoc
·3 min read
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Oakmark Funds, an investment management firm, published its “Oakmark Fund” first quarter 2021 investor letter – a copy of which can be seen here. A return of 15.5% was reported by the fund in the Q1 of 2021, outperforming its S&P 500 benchmark that delivered a 6.2% return for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Oakmark Funds, in their Q1 2021 investor letter, mentioned ConocoPhillips (NYSE: COP) and shared their insights on the company. ConocoPhillips is a Houston, Texas-based natural gas liquids company that currently has a $68.7 billion market capitalization. Since the beginning of the year, COP delivered a 27.18% return, extending its 12-month gains to 48.28%. As of April 12, 2021, the stock closed at $50.86 per share.

Here is what Oakmark Funds has to say about ConocoPhillips in their Q1 2021 investor letter:

"We elected to retain a position in ConocoPhillips following its all-stock acquisition of portfolio holding Concho Resources after determining that the combined entity was nearly as undervalued as stand-alone Concho. We believe Conoco is one of the highest quality independent oil producers in the world today. The company has decades of low-cost drilling inventory in attractive oil basins, minimal leverage and industry-leading returns on invested capital. Conoco management has built this enviable competitive position through years of shrewd capital allocation and efficient operations. This includes a history of accretive divestitures and opportunistic acquisitions, the latest example being Concho. For Conoco, the Concho deal adds some of the highest quality acreage in the Permian Basin at an attractive all-in cost, with an opportunity to create incremental value by eliminating duplicative costs and monetizing excess acreage. We believe this value-focused approach to both acquisitions and divestitures is rare in oil and gas and we are pleased to invest alongside these stewards of capital. The shares are priced at a double-digit free cash flow yield and a discount to peers on most earnings metrics, so we took advantage of the opportunity to own the business at an attractive price."

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Copyright: Elnur / 123RF Stock Photo

Our calculations show that ConocoPhillips (NYSE: COP) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, ConocoPhillips was in 49 hedge fund portfolios compared to 45 funds in the third quarter. COP delivered a 12.13% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.