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Did Hedge Funds Make The Right Call On WPX Energy Inc (WPX)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of WPX Energy Inc (NYSE:WPX) based on that data and determine whether they were really smart about the stock.

Is WPX Energy Inc (NYSE:WPX) the right pick for your portfolio? Money managers were taking a pessimistic view. The number of long hedge fund bets were cut by 15 recently. Our calculations also showed that WPX 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). WPX was in 29 hedge funds’ portfolios at the end of the first quarter of 2020. There were 44 hedge funds in our database with WPX holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are tons of tools shareholders have at their disposal to size up stocks. Some of the most under-the-radar tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can beat their index-focused peers by a solid margin (see the details here).

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus 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 view the latest hedge fund action surrounding WPX Energy Inc (NYSE:WPX).

What have hedge funds been doing with WPX Energy Inc (NYSE:WPX)?

At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -34% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards WPX over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is WPX A Good Stock To Buy?

The largest stake in WPX Energy Inc (NYSE:WPX) was held by Southport Management, which reported holding $244 million worth of stock at the end of September. It was followed by Adage Capital Management with a $63.3 million position. Other investors bullish on the company included AQR Capital Management, Omega Advisors, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Southport Management allocated the biggest weight to WPX Energy Inc (NYSE:WPX), around 2.72% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, dishing out 2.53 percent of its 13F equity portfolio to WPX.

Due to the fact that WPX Energy Inc (NYSE:WPX) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that elected to cut their entire stakes last quarter. It’s worth mentioning that Jonathan Barrett and Paul Segal’s Luminus Management cut the biggest stake of the 750 funds watched by Insider Monkey, valued at close to $30.1 million in stock, and  Renaissance Technologies was right behind this move, as the fund cut about $27.6 million worth. These transactions are important to note, as total hedge fund interest dropped by 15 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to WPX Energy Inc (NYSE:WPX). These stocks are PennyMac Financial Services Inc (NYSE:PFSI), PJT Partners Inc (NYSE:PJT), Helmerich & Payne, Inc. (NYSE:HP), and Hancock Whitney Corporation (NASDAQ:HWC). All of these stocks’ market caps are similar to WPX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFSI 24 210160 8
PJT 22 88247 2
HP 27 114660 -6
HWC 20 40474 4
Average 23.25 113385 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $412 million in WPX’s case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand Hancock Whitney Corporation (NASDAQ:HWC) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks WPX Energy Inc (NYSE:WPX) 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 WPX as the stock returned 109.2% 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.