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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards ConocoPhillips (NYSE:COP).
Is ConocoPhillips (NYSE:COP) a worthy stock to buy now? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund positions dropped by 1 recently. ConocoPhillips (NYSE:COP) was in 50 hedge funds' portfolios at the end of June. The all time high for this statistic is 70. Our calculations also showed that COP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 51 hedge funds in our database with COP holdings at the end of March.
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 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Donald Yacktman of Yacktman Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a look at the latest hedge fund action regarding ConocoPhillips (NYSE:COP).
Do Hedge Funds Think COP Is A Good Stock To Buy Now?
At the end of June, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the previous quarter. The graph below displays the number of hedge funds with bullish position in COP over the last 24 quarters. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in ConocoPhillips (NYSE:COP), which was worth $340.5 million at the end of the second quarter. On the second spot was Adage Capital Management which amassed $337.4 million worth of shares. Citadel Investment Group, Yacktman Asset Management, and Millennium 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 Elm Ridge Capital allocated the biggest weight to ConocoPhillips (NYSE:COP), around 5.9% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, earmarking 3.45 percent of its 13F equity portfolio to COP.
Judging by the fact that ConocoPhillips (NYSE:COP) has experienced a decline in interest from hedge fund managers, logic holds that there is a sect of hedge funds that decided to sell off their full holdings in the second quarter. Interestingly, Vince Maddi and Shawn Brennan's SIR Capital Management cut the largest investment of all the hedgies watched by Insider Monkey, valued at close to $18.7 million in stock, and Randall Smith's Alden Global Capital was right behind this move, as the fund sold off about $2.2 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as ConocoPhillips (NYSE:COP) but similarly valued. These stocks are The TJX Companies, Inc. (NYSE:TJX), Cigna Corporation (NYSE:CI), Enbridge Inc (NYSE:ENB), The PNC Financial Services Group Inc. (NYSE:PNC), Brookfield Asset Management Inc. (NYSE:BAM), Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), and FedEx Corporation (NYSE:FDX). This group of stocks' market valuations are closest to COP's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TJX,56,2387336,-7 CI,63,2807451,10 ENB,19,166071,-3 PNC,38,727612,-1 BAM,34,1657528,0 PBR,25,2799044,-2 FDX,61,2170185,-2 Average,42.3,1816461,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.3 hedge funds with bullish positions and the average amount invested in these stocks was $1816 million. That figure was $1159 million in COP's case. Cigna Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 19 bullish hedge fund positions. ConocoPhillips (NYSE:COP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COP is 60.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on COP as the stock returned 25.6% since the end of Q2 (through 11/5) 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.