Did Hedge Funds Make The Right Call On Noble Energy, Inc. (NBL) ?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Noble Energy, Inc. (NYSE:NBL) and determine whether hedge funds had an edge regarding this stock.

Noble Energy, Inc. (NYSE:NBL) was in 35 hedge funds’ portfolios at the end of March. NBL investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 28 hedge funds in our database with NBL holdings at the end of the previous quarter. Our calculations also showed that NBL isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the 21st century investor’s toolkit there are tons of formulas market participants use to evaluate their holdings. A duo of the most innovative formulas are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the top money managers can trounce the broader indices by a solid amount (see the details here).


Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the fresh hedge fund action regarding Noble Energy, Inc. (NYSE:NBL).

How are hedge funds trading Noble Energy, Inc. (NYSE:NBL)?

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in NBL over the last 18 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Is NBL A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Noble Energy, Inc. (NYSE:NBL). Citadel Investment Group has a $101.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $58.6 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Steve Cohen’s Point72 Asset Management, D. E. Shaw’s D E Shaw and Brandon Haley’s Holocene Advisors. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Noble Energy, Inc. (NYSE:NBL), around 3.45% of its 13F portfolio. Centenus Global Management is also relatively very bullish on the stock, earmarking 1.34 percent of its 13F equity portfolio to NBL.

Consequently, some big names have been driving this bullishness. D E Shaw, managed by D. E. Shaw, established the biggest position in Noble Energy, Inc. (NYSE:NBL). D E Shaw had $31.3 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $26.9 million position during the quarter. The other funds with new positions in the stock are  Renaissance Technologies, Anand Parekh’s Alyeska Investment Group, and Till Bechtolsheimer’s Arosa Capital Management.

Let’s check out hedge fund activity in other stocks similar to Noble Energy, Inc. (NYSE:NBL). These stocks are Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Mantech International Corp (NASDAQ:MANT), Crane Co. (NYSE:CR), and White Mountains Insurance Group Ltd (NYSE:WTM). All of these stocks’ market caps resemble NBL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ARWR 22 160633 -4
MANT 17 32174 -6
CR 26 197568 3
WTM 16 133496 0
Average 20.25 130968 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $131 million. That figure was $383 million in NBL’s case. Crane Co. (NYSE:CR) is the most popular stock in this table. On the other hand White Mountains Insurance Group Ltd (NYSE:WTM) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Noble Energy, Inc. (NYSE:NBL) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on NBL as the stock returned 48.7% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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