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Were Hedge Funds Right About Buying Exxon Mobil Corporation (XOM)?

Debasis Saha

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Exxon Mobil Corporation (NYSE:XOM) and determine whether the smart money was really smart about this stock.

Exxon Mobil Corporation (NYSE:XOM) investors should be aware of an increase in hedge fund sentiment in recent months. XOM was in 65 hedge funds' portfolios at the end of the first quarter of 2020. There were 63 hedge funds in our database with XOM positions at the end of the previous quarter. Our calculations also showed that XOM isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

To most stock holders, hedge funds are viewed as underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, We look at the upper echelon of this group, around 850 funds. These hedge fund managers oversee the lion's share of all hedge funds' total capital, and by tracking their finest stock picks, Insider Monkey has determined various investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

[caption id="attachment_26335" align="aligncenter" width="400"] Ken Fisher of Fisher Asset Management[/caption]

Ken Fisher FISHER ASSET MANAGEMENT

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to go over the recent hedge fund action encompassing Exxon Mobil Corporation (NYSE:XOM).

How have hedgies been trading Exxon Mobil Corporation (NYSE:XOM)?

At the end of the first quarter, a total of 65 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in XOM over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is XOM A Good Stock To Buy?

The largest stake in Exxon Mobil Corporation (NYSE:XOM) was held by D E Shaw, which reported holding $341.3 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $257.1 million position. Other investors bullish on the company included Citadel Investment Group, Adage Capital Management, and Maple Rock Capital. In terms of the portfolio weights assigned to each position Stamos Capital allocated the biggest weight to Exxon Mobil Corporation (NYSE:XOM), around 3.21% of its 13F portfolio. ZWEIG DIMENNA PARTNERS is also relatively very bullish on the stock, setting aside 2.47 percent of its 13F equity portfolio to XOM.

Now, key money managers have jumped into Exxon Mobil Corporation (NYSE:XOM) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Exxon Mobil Corporation (NYSE:XOM). Arrowstreet Capital had $53.2 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $18.8 million position during the quarter. The other funds with brand new XOM positions are Joe DiMenna's ZWEIG DIMENNA PARTNERS, Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, and Warren Lammert's Granite Point Capital.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Exxon Mobil Corporation (NYSE:XOM) but similarly valued. We will take a look at Comcast Corporation (NASDAQ:CMCSA), China Mobile Limited (NYSE:CHL), Adobe Inc. (NASDAQ:ADBE), and Oracle Corporation (NASDAQ:ORCL). This group of stocks' market valuations are closest to XOM's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMCSA,83,5538665,-4 CHL,11,449753,-1 ADBE,115,8180671,9 ORCL,48,2437677,-11 Average,64.25,4151692,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 64.25 hedge funds with bullish positions and the average amount invested in these stocks was $4152 million. That figure was $1295 million in XOM's case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 11 bullish hedge fund positions. Exxon Mobil Corporation (NYSE:XOM) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on XOM, though not to the same extent, as the stock returned 21.3% during the first two months and twenty five days of the second quarter and outperformed the market as well.

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

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