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Is Suncor Energy Inc. (SU) Going to Burn These Hedge Funds?

Asma UL Husna

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 28. In this article, we will use that wealth of knowledge to determine whether or not Suncor Energy Inc. (NYSE:SU) makes for a good investment right now.

Is Suncor Energy Inc. (NYSE:SU) a good investment now? Investors who are in the know reduced their bullish sentiment at the margin. The number of bullish hedge fund positions went down by 1 lately. Our calculations also showed that SU isn't among the 30 most popular stocks among hedge funds (watch the video below). SU was in 32 hedge funds' portfolios at the end of the second quarter of 2019. There were 33 hedge funds in our database with SU holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are many methods stock market investors can use to evaluate their stock investments. Two of the less utilized methods are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outclass the S&P 500 by a very impressive margin (see the details here).

SU_oct2019

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 glance at the new hedge fund action regarding Suncor Energy Inc. (NYSE:SU).

Hedge fund activity in Suncor Energy Inc. (NYSE:SU)

At the end of the second quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SU over the last 16 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Matthew Hulsizer PEAK6 Capital

The largest stake in Suncor Energy Inc. (NYSE:SU) was held by Berkshire Hathaway, which reported holding $335.2 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $150.5 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and Point72 Asset Management.

Since Suncor Energy Inc. (NYSE:SU) has faced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedge funds that slashed their entire stakes heading into Q3. It's worth mentioning that John Horseman's Horseman Capital Management cut the biggest stake of all the hedgies followed by Insider Monkey, totaling about $6 million in stock, and Jeffrey Talpins's Element Capital Management was right behind this move, as the fund sold off about $3 million worth. These moves are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q3.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Suncor Energy Inc. (NYSE:SU) but similarly valued. These stocks are Illinois Tool Works Inc. (NYSE:ITW), Bank of Montreal (NYSE:BMO), Relx PLC (NYSE:RELX), and Workday Inc (NASDAQ:WDAY). All of these stocks' market caps match SU's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ITW,28,306050,1 BMO,13,292499,-2 RELX,3,106280,-4 WDAY,41,1469586,8 Average,21.25,543604,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $544 million. That figure was $1297 million in SU's case. Workday Inc (NASDAQ:WDAY) is the most popular stock in this table. On the other hand Relx PLC (NYSE:RELX) is the least popular one with only 3 bullish hedge fund positions. Suncor Energy Inc. (NYSE:SU) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on SU, though not to the same extent, as the stock returned 2.5% during the third quarter and outperformed the market as well.

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

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