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Pioneer Natural Resources Company (PXD) vs. Hedge Fund Favorites in 2019

Debasis Saha

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Pioneer Natural Resources Company (NYSE:PXD).

Is Pioneer Natural Resources Company (NYSE:PXD) the right investment to pursue these days? Money managers are turning less bullish. The number of long hedge fund bets were cut by 1 in recent months. Our calculations also showed that PXD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

If you'd ask most market participants, hedge funds are viewed as unimportant, outdated financial tools of years past. While there are over 8000 funds in operation at present, Our experts choose to focus on the masters of this group, approximately 750 funds. These money managers command bulk of all hedge funds' total asset base, and by shadowing their highest performing investments, Insider Monkey has identified a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_340081" align="alignnone" width="600"] Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to take a peek at the fresh hedge fund action regarding Pioneer Natural Resources Company (NYSE:PXD).

What does smart money think about Pioneer Natural Resources Company (NYSE:PXD)?

At Q3's end, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from one quarter earlier. On the other hand, there were a total of 58 hedge funds with a bullish position in PXD a year ago. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is PXD A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Abrams Bison Investments, managed by Gavin M. Abrams, holds the biggest position in Pioneer Natural Resources Company (NYSE:PXD). Abrams Bison Investments has a $188.7 million position in the stock, comprising 18.8% of its 13F portfolio. On Abrams Bison Investments's heels is Phill Gross and Robert Atchinson of Adage Capital Management, with a $169.6 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Steve Cohen's Point72 Asset Management, Todd J. Kantor's Encompass Capital Advisors and John W. Rogers's Ariel Investments. In terms of the portfolio weights assigned to each position Abrams Bison Investments allocated the biggest weight to Pioneer Natural Resources Company (NYSE:PXD), around 18.84% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, designating 13.84 percent of its 13F equity portfolio to PXD.

Because Pioneer Natural Resources Company (NYSE:PXD) has faced declining sentiment from hedge fund managers, it's easy to see that there was a specific group of fund managers that elected to cut their full holdings last quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group dumped the biggest stake of the 750 funds tracked by Insider Monkey, totaling close to $19.1 million in call options, and Israel Englander's Millennium Management was right behind this move, as the fund cut about $14.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Pioneer Natural Resources Company (NYSE:PXD) but similarly valued. We will take a look at AMETEK, Inc. (NYSE:AME), Corteva, Inc. (NYSE:CTVA), Tencent Music Entertainment Group (NYSE:TME), and Zoom Video Communications, Inc. (NASDAQ:ZM). This group of stocks' market values are similar to PXD's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AME,29,963376,-2 CTVA,35,457542,-1 TME,15,378566,4 ZM,30,468958,-2 Average,27.25,567111,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $567 million. That figure was $1014 million in PXD's case. Corteva, Inc. (NYSE:CTVA) is the most popular stock in this table. On the other hand Tencent Music Entertainment Group (NYSE:TME) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Pioneer Natural Resources Company (NYSE:PXD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately PXD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on PXD were disappointed as the stock returned 15.4% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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