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The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Valero Energy Corporation (NYSE:VLO).
Is VLO a good stock to buy? Valero Energy Corporation (NYSE:VLO) shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. Valero Energy Corporation (NYSE:VLO) was in 38 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 56. There were 39 hedge funds in our database with VLO holdings at the end of June. Our calculations also showed that VLO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we're going to view the new hedge fund action regarding Valero Energy Corporation (NYSE:VLO).
Do Hedge Funds Think VLO Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the second quarter of 2020. On the other hand, there were a total of 37 hedge funds with a bullish position in VLO a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Valero Energy Corporation (NYSE:VLO), which was worth $55.9 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $40.4 million worth of shares. AQR Capital Management, Citadel Investment Group, and Renaissance Technologies 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 Invenomic Capital Management allocated the biggest weight to Valero Energy Corporation (NYSE:VLO), around 0.61% of its 13F portfolio. Swift Run Capital Management is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to VLO.
Seeing as Valero Energy Corporation (NYSE:VLO) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of hedgies that slashed their full holdings last quarter. It's worth mentioning that Anand Parekh's Alyeska Investment Group cut the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $14.5 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dropped its stock, about $5.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let's now review hedge fund activity in other stocks similar to Valero Energy Corporation (NYSE:VLO). We will take a look at Coca-Cola European Partners plc (NYSE:CCEP), CMS Energy Corporation (NYSE:CMS), CGI Inc. (NYSE:GIB), Conagra Brands, Inc. (NYSE:CAG), Restaurant Brands International Inc (NYSE:QSR), Canon Inc. (NYSE:CAJ), and Amcor plc (NYSE:AMCR). This group of stocks' market valuations are closest to VLO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCEP,23,464184,-4 CMS,29,370207,-1 GIB,20,191122,1 CAG,35,770291,0 QSR,33,2742752,-11 CAJ,7,52605,-2 AMCR,18,238966,2 Average,23.6,690018,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $690 million. That figure was $237 million in VLO's case. Conagra Brands, Inc. (NYSE:CAG) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Valero Energy Corporation (NYSE:VLO) is more popular among hedge funds. Our overall hedge fund sentiment score for VLO is 74.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on VLO as the stock returned 28.7% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.