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Suncor Energy Inc. (SU) vs. Hedge Fund Favorites in 2019

Reymerlyn Martin

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Suncor Energy Inc. (NYSE:SU).

Suncor Energy Inc. (NYSE:SU) investors should be aware of an increase in enthusiasm from smart money in recent months. SU was in 37 hedge funds' portfolios at the end of September. There were 32 hedge funds in our database with SU positions at the end of the previous quarter. Our calculations also showed that SU 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).

Today there are a multitude of indicators investors put to use to size up publicly traded companies. A couple of the most innovative indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top fund managers can trounce the S&P 500 by a solid amount (see the details here).

[caption id="attachment_26340" align="aligncenter" width="594"] Ken Griffin of Citadel Investment Group[/caption]

CITADEL INVESTMENT GROUP

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. Keeping this in mind let's check out the fresh hedge fund action encompassing Suncor Energy Inc. (NYSE:SU).

How have hedgies been trading Suncor Energy Inc. (NYSE:SU)?

At Q3's end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SU over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Berkshire Hathaway held the most valuable stake in Suncor Energy Inc. (NYSE:SU), which was worth $339.7 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $276.5 million worth of shares. Two Sigma Advisors, D E Shaw, and Citadel Investment Group 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 Soapstone Capital allocated the biggest weight to Suncor Energy Inc. (NYSE:SU), around 9.03% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, designating 4.16 percent of its 13F equity portfolio to SU.

Now, specific money managers have jumped into Suncor Energy Inc. (NYSE:SU) headfirst. Everett Capital Advisors, managed by Kelly Hampaul, assembled the largest call position in Suncor Energy Inc. (NYSE:SU). Everett Capital Advisors had $4.4 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $2.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Parvinder Thiara's Athanor Capital, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk's GRT Capital Partners.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Suncor Energy Inc. (NYSE:SU) but similarly valued. These stocks are America Movil SAB de CV (NYSE:AMX), Equinix Inc (NASDAQ:EQIX), Air Products & Chemicals, Inc. (NYSE:APD), and Kimberly Clark Corporation (NYSE:KMB). This group of stocks' market valuations are similar to SU's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMX,9,188555,0 EQIX,33,1580931,-5 APD,38,478746,6 KMB,40,1622264,0 Average,30,967624,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $968 million. That figure was $1417 million in SU's case. Kimberly Clark Corporation (NYSE:KMB) is the most popular stock in this table. On the other hand America Movil SAB de CV (NYSE:AMX) is the least popular one with only 9 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. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately SU wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SU were disappointed as the stock returned 22.5% in 2019 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 many of these stocks already outperformed the market so far this year. 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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