Did Hedge Funds Drop The Ball On Noble Energy, Inc. (NBL) ?

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 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. 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 Noble Energy, Inc. (NYSE:NBL).

Noble Energy, Inc. (NYSE:NBL) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds’ portfolios at the end of December. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Masco Corporation (NYSE:MAS), Twilio Inc. (NYSE:TWLO), and Viacom, Inc. (NASDAQ:VIAB) to gather more data points.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Boykin Curry of Eagle Capital

Let’s go over the new hedge fund action regarding Noble Energy, Inc. (NYSE:NBL).

What does the smart money think about Noble Energy, Inc. (NYSE:NBL)?

At Q4’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards NBL over the last 14 quarters. So, let’s find out 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 Noble Energy, Inc. (NYSE:NBL), which was worth $297.4 million at the end of the third quarter. On the second spot was Eagle Capital Management which amassed $111 million worth of shares. Moreover, Diamond Hill Capital, Millennium Management, and SailingStone Capital Partners were also bullish on Noble Energy, Inc. (NYSE:NBL), allocating a large percentage of their portfolios to this stock.

Because Noble Energy, Inc. (NYSE:NBL) has faced falling interest from the smart money, it’s easy to see that there were a few hedgies that slashed their full holdings heading into Q3. At the top of the heap, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital said goodbye to the largest stake of the 700 funds monitored by Insider Monkey, comprising about $47.4 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $40 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Noble Energy, Inc. (NYSE:NBL). These stocks are Masco Corporation (NYSE:MAS), Twilio Inc. (NYSE:TWLO), Viacom, Inc. (NASDAQ:VIAB), and Yandex NV (NASDAQ:YNDX). This group of stocks’ market values are closest to NBL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAS 34 1007083 -1
TWLO 46 1506949 5
VIAB 37 690422 4
YNDX 23 514984 -14
Average 35 929860 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $930 million. That figure was $625 million in NBL’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Yandex NV (NASDAQ:YNDX) is the least popular one with only 23 bullish hedge fund positions. Noble Energy, Inc. (NYSE:NBL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on NBL as the stock returned 36.5% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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