Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Occidental Petroleum Corporation (NYSE:OXY) investors should be aware of an increase in activity from the world's largest hedge funds recently. OXY was in 42 hedge funds' portfolios at the end of June. There were 35 hedge funds in our database with OXY positions at the end of the previous quarter. Our calculations also showed that OXY 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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the latest hedge fund action surrounding Occidental Petroleum Corporation (NYSE:OXY).
How are hedge funds trading Occidental Petroleum Corporation (NYSE:OXY)?
At the end of the second quarter, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. By comparison, 42 hedge funds held shares or bullish call options in OXY a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Occidental Petroleum Corporation (NYSE:OXY) was held by Icahn Capital LP, which reported holding $1671.5 million worth of stock at the end of March. It was followed by Two Sigma Advisors with a $346 million position. Other investors bullish on the company included Pentwater Capital Management, D E Shaw, and Mason Capital Management.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Icahn Capital LP, managed by Carl Icahn, initiated the largest position in Occidental Petroleum Corporation (NYSE:OXY). Icahn Capital LP had $1.6715 billion invested in the company at the end of the quarter. Matthew Halbower's Pentwater Capital Management also made a $157.4 million investment in the stock during the quarter. The other funds with brand new OXY positions are Kenneth Mario Garschina's Mason Capital Management, Todd J. Kantor's Encompass Capital Advisors, and Michel Massoud's Melqart Asset Management.
Let's now review hedge fund activity in other stocks similar to Occidental Petroleum Corporation (NYSE:OXY). These stocks are Manulife Financial Corporation (NYSE:MFC), Marathon Petroleum Corporation (NYSE:MPC), Ross Stores, Inc. (NASDAQ:ROST), and Anadarko Petroleum Corporation (NYSE:APC). This group of stocks' market caps are similar to OXY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MFC,16,277367,0 MPC,60,3075008,-5 ROST,32,862087,3 APC,77,7591969,27 Average,46.25,2951608,6.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.25 hedge funds with bullish positions and the average amount invested in these stocks was $2952 million. That figure was $2688 million in OXY's case. Anadarko Petroleum Corporation (NYSE:APC) is the most popular stock in this table. On the other hand Manulife Financial Corporation (NYSE:MFC) is the least popular one with only 16 bullish hedge fund positions. Occidental Petroleum Corporation (NYSE:OXY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately OXY wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OXY investors were disappointed as the stock returned -10% during the third quarter 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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