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2019 Review: Most Favored Hedge Fund Stocks vs. ConocoPhillips Company (COP)

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 so far 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 ConocoPhillips Company (NYSE:COP).

Is ConocoPhillips Company (NYSE:COP) a first-rate investment now? The best stock pickers are buying. The number of long hedge fund positions went up by 8 recently. Our calculations also showed that COP 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). COP was in 65 hedge funds’ portfolios at the end of the third quarter of 2019. There were 57 hedge funds in our database with COP holdings at the end of the previous quarter.

If you’d ask most market participants, hedge funds are seen as unimportant, outdated investment tools of years past. While there are greater than 8000 funds in operation at the moment, We hone in on the leaders of this club, about 750 funds. These hedge fund managers direct the lion’s share of the hedge fund industry’s total asset base, and by tracking their inimitable stock picks, Insider Monkey has come up with several investment strategies that have historically outrun 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 annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

George Soros of Soros Fund Management

We leave no stone unturned when looking for the next great investment idea. For example one of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his 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 review the fresh hedge fund action encompassing ConocoPhillips Company (NYSE:COP).

What does smart money think about ConocoPhillips Company (NYSE:COP)?

At the end of the third quarter, a total of 65 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. By comparison, 55 hedge funds held shares or bullish call options in COP a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, D E Shaw, managed by David E. Shaw, holds the most valuable position in ConocoPhillips Company (NYSE:COP). D E Shaw has a $849.5 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Ken Griffin of Citadel Investment Group, with a $362.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism encompass Ken Fisher’s Fisher Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position GeoSphere Capital Management allocated the biggest weight to ConocoPhillips Company (NYSE:COP), around 6.24% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, setting aside 4.23 percent of its 13F equity portfolio to COP.

As industrywide interest jumped, specific money managers have been driving this bullishness. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, assembled the biggest position in ConocoPhillips Company (NYSE:COP). Senator Investment Group had $28.5 million invested in the company at the end of the quarter. Till Bechtolsheimer’s Arosa Capital Management also initiated a $22.8 million position during the quarter. The other funds with brand new COP positions are George Soros’s Soros Fund Management, Peter Muller’s PDT Partners, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks similar to ConocoPhillips Company (NYSE:COP). We will take a look at Colgate-Palmolive Company (NYSE:CL), Equinor ASA (NYSE:EQNR), Enterprise Products Partners L.P. (NYSE:EPD), and The PNC Financial Services Group, Inc. (NYSE:PNC). This group of stocks’ market caps resemble COP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CL 42 2061209 0
EQNR 14 392283 1
EPD 21 301985 2
PNC 39 2074279 1
Average 29 1207439 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $1207 million. That figure was $2902 million in COP’s case. Colgate-Palmolive Company (NYSE:CL) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks ConocoPhillips Company (NYSE:COP) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately COP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on COP were disappointed as the stock returned 5.9% so far in 2019 (through 12/23) 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 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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