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Where Do Hedge Funds Stand On Suncor Energy Inc. (SU)?

Debasis Saha
·5 min read

In this article we will take a look at whether hedge funds think Suncor Energy Inc. (NYSE:SU) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Suncor Energy Inc. (NYSE:SU) was in 22 hedge funds' portfolios at the end of September. The all time high for this statistic is 41. SU shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. There were 29 hedge funds in our database with SU holdings at the end of June. 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 for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are several methods investors use to evaluate stocks. A couple of the less known methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best fund managers can trounce the broader indices by a healthy margin (see the details here).

Warren Buffett of Berkshire Hathaway

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 take a look at the new hedge fund action regarding Suncor Energy Inc. (NYSE:SU).

Do Hedge Funds Think SU Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from the previous quarter. By comparison, 41 hedge funds held shares or bullish call options in SU a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is SU A Good Stock To Buy?
Is SU A Good Stock To Buy?

More specifically, Berkshire Hathaway was the largest shareholder of Suncor Energy Inc. (NYSE:SU), with a stake worth $234.8 million reported as of the end of September. Trailing Berkshire Hathaway was Lyrical Asset Management, which amassed a stake valued at $107.8 million. D E Shaw, Citadel Investment Group, and Millennium Management 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 Lyrical Asset Management allocated the biggest weight to Suncor Energy Inc. (NYSE:SU), around 1.96% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, dishing out 1.63 percent of its 13F equity portfolio to SU.

Since Suncor Energy Inc. (NYSE:SU) has faced falling interest from the smart money, we can see that there exists a select few funds who were dropping their entire stakes last quarter. Interestingly, Jonathan Barrett and Paul Segal's Luminus Management cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $80.1 million in stock. Till Bechtolsheimer's fund, Arosa Capital Management, also said goodbye to its stock, about $11.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Suncor Energy Inc. (NYSE:SU). These stocks are PG&E Corporation (NYSE:PCG), Ameriprise Financial, Inc. (NYSE:AMP), Keysight Technologies Inc (NYSE:KEYS), Laboratory Corp. of America Holdings (NYSE:LH), MarketAxess Holdings Inc. (NASDAQ:MKTX), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), and Paycom Software Inc (NYSE:PAYC). 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 PCG,76,6685918,-16 AMP,29,618831,1 KEYS,36,364966,-11 LH,57,1749727,5 MKTX,34,941566,1 BBVA,10,104422,-1 PAYC,38,655179,2 Average,40,1588658,-2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $1589 million. That figure was $559 million in SU's case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 10 bullish hedge fund positions. Suncor Energy Inc. (NYSE:SU) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SU is 23.2. 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on SU as the stock returned 49.5% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

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

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