Hedge Fund Sentiment Is Stagnant On Ecopetrol S.A. (ADR) (EC)

Hedge funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Ecopetrol S.A. (ADR) (NYSE:EC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Hedge fund interest in Ecopetrol S.A. (ADR) (NYSE:EC) shares was flat during the third quarter. This is usually a negative indicator. 8 hedge funds that we track owned the stock on September 30, same as on June 30. At the end of this article we will also compare EC to other stocks including Deutsche Bank AG (USA) (NYSE:DB), Sasol Limited (ADR) (NYSE:SSL), and Molson Coors Brewing Company (NYSE:TAP) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

What does the smart money think about Ecopetrol S.A. (ADR) (NYSE:EC)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in EC heading into this year, so hedge fund ownership is up slightly in 2016. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in Ecopetrol S.A. (ADR) (NYSE:EC). Renaissance Technologies has a $40.7 million position in the stock. Sitting at the No. 2 spot is Point72 Asset Management, led by Steve Cohen, which holds a $12 million position. Other peers that are bullish consist of Israel Englander’s Millennium Management, David E. Shaw’s D E Shaw, and Jos Shaver’s Electron Capital Partners. We should note that Electron Capital Partners is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-micro-cap stocks.

We view hedge fund activity in the stock as unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Electron Capital Partners).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ecopetrol S.A. (ADR) (NYSE:EC) but similarly valued. We will take a look at Deutsche Bank AG (USA) (NYSE:DB), Sasol Limited (ADR) (NYSE:SSL), Molson Coors Brewing Company (NYSE:TAP), and POSCO (ADR) (NYSE:PKX). All of these stocks’ market caps match EC’s market cap.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $909 million. That figure was just $58 million in EC’s case. Molson Coors Brewing Company (NYSE:TAP) is the most popular stock in this table. On the other hand Sasol Limited (ADR) (NYSE:SSL) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Ecopetrol S.A. (ADR) (NYSE:EC) is even less popular than SSL. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.

Disclosure: None