Did Hedge Funds Catch A Break With Pioneer Natural Resources Company (PXD)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Pioneer Natural Resources Company (NYSE:PXD) and determine whether hedge funds skillfully traded this stock.

Pioneer Natural Resources Company (NYSE:PXD) has seen an increase in support from the world’s most elite money managers lately. Pioneer Natural Resources Company (NYSE:PXD) was in 48 hedge funds’ portfolios at the end of September. The all time high for this statistic is 74. There were 45 hedge funds in our database with PXD holdings at the end of June. Our calculations also showed that PXD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s view the latest hedge fund action regarding Pioneer Natural Resources Company (NYSE:PXD).

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

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

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PXD over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Adage Capital Management held the most valuable stake in Pioneer Natural Resources Company (NYSE:PXD), which was worth $262.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $148.7 million worth of shares. Holocene Advisors, Citadel Investment Group, and Marshall Wace LLP 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 Value Holdings LP allocated the biggest weight to Pioneer Natural Resources Company (NYSE:PXD), around 3.74% of its 13F portfolio. Key Square Capital Management is also relatively very bullish on the stock, earmarking 3.24 percent of its 13F equity portfolio to PXD.

Now, some big names were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, created the biggest position in Pioneer Natural Resources Company (NYSE:PXD). Point72 Asset Management had $26.7 million invested in the company at the end of the quarter. James Woodson Davis’s Woodson Capital Management also made a $25.3 million investment in the stock during the quarter. The other funds with brand new PXD positions are Todd J. Kantor’s Encompass Capital Advisors, Dmitry Balyasny’s Balyasny Asset Management, and Ken Heebner’s Capital Growth Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pioneer Natural Resources Company (NYSE:PXD) but similarly valued. We will take a look at American Electric Power Company, Inc. (NASDAQ:AEP), Prudential Financial Inc (NYSE:PRU), Koninklijke Philips NV (NYSE:PHG), Paychex, Inc. (NASDAQ:PAYX), Electronic Arts Inc. (NASDAQ:EA), Constellation Brands, Inc. (NYSE:STZ), and Sempra (NYSE:SRE). All of these stocks’ market caps are closest to PXD’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEP 36 751595 7
PRU 33 460021 5
PHG 11 79466 1
PAYX 34 1115089 5
EA 53 1097032 -3
STZ 53 1719109 3
SRE 23 287269 -5
Average 34.7 787083 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $787 million. That figure was $959 million in PXD’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 11 bullish hedge fund positions. Pioneer Natural Resources Company (NYSE:PXD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PXD is 71.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on PXD as the stock returned 34.1% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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