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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Suncor Energy Inc. (NYSE:SU) to find out whether there were any major changes in hedge funds' views.
Is SU a good stock to buy? Suncor Energy Inc. (NYSE:SU) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 32 hedge funds' portfolios at the end of the third quarter of 2021. Our calculations also showed that SU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare SU to other stocks including Arthur J. Gallagher & Co. (NYSE:AJG), American Water Works Company, Inc. (NYSE:AWK), and Nokia Corporation (NYSE:NOK) to get a better sense of its popularity.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind let's take a look at the recent hedge fund action surrounding Suncor Energy Inc. (NYSE:SU).
Do Hedge Funds Think SU Is A Good Stock To Buy Now?
At the end of September, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in SU a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in Suncor Energy Inc. (NYSE:SU), which was worth $184 million at the end of the third quarter. On the second spot was D E Shaw which amassed $157.5 million worth of shares. Lyrical Asset Management, Third Point, and Holocene Advisors 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 NewGen Asset Management allocated the biggest weight to Suncor Energy Inc. (NYSE:SU), around 5.82% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 2.93 percent of its 13F equity portfolio to SU.
Due to the fact that Suncor Energy Inc. (NYSE:SU) has experienced declining sentiment from the smart money, logic holds that there lies a certain "tier" of money managers that slashed their full holdings heading into Q4. It's worth mentioning that Charles Davidson and Joseph Jacobs's Wexford Capital dumped the biggest stake of the "upper crust" of funds monitored by Insider Monkey, worth close to $19.5 million in stock, and Scott Bessent's Key Square Capital Management was right behind this move, as the fund dropped about $10.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
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. We will take a look at Arthur J. Gallagher & Co. (NYSE:AJG), American Water Works Company, Inc. (NYSE:AWK), Nokia Corporation (NYSE:NOK), Phillips 66 (NYSE:PSX), Liberty Broadband Corp (NASDAQ:LBRDA), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Chunghwa Telecom Co., Ltd (NYSE:CHT). This group of stocks' market values resemble SU's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AJG,32,1388489,-8 AWK,28,1127944,-2 NOK,22,388301,-4 PSX,34,409385,8 LBRDA,24,885745,-4 ZBH,47,1664979,-1 CHT,6,156827,-1 Average,27.6,860239,-1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $860 million. That figure was $1085 million in SU's case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 6 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 overall hedge fund sentiment score for SU is 60.1. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on SU as the stock returned 17.4% since the end of Q3 (through 11/30) 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.