Do Hedge Funds Love PetroChina Company Limited (PTR)?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

PetroChina Company Limited (NYSE:PTR) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds’ portfolios at the end of the third quarter of 2018. At the end of this article, we will also compare PTR to other stocks including Unilever plc (NYSE:UL), Unilever N.V. (NYSE:UN), and DowDuPont Inc. (NYSE:DWDP) to get a better sense of its popularity.

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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

We’re going to review the recent hedge fund action encompassing PetroChina Company Limited (NYSE:PTR).

Hedge fund activity in PetroChina Company Limited (NYSE:PTR)

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, representing no change from the second quarter of 2018. By comparison, 10 hedge funds held shares or bullish call options in PTR heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds with PTR Positions

Among these funds, Renaissance Technologies held the most valuable stake in PetroChina Company Limited (NYSE:PTR), which was worth $71.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $57.2 million worth of shares. Moreover, AQR Capital Management, Millennium Management, and Point72 Asset Management were also bullish on PetroChina Company Limited (NYSE:PTR), allocating a large percentage of their portfolios to this stock.

Judging by the fact that PetroChina Company Limited (NYSE:PTR) has faced declining sentiment from hedge fund managers, we can see that there is a sect of money managers that elected to cut their positions entirely last quarter. At the top of the heap, Ray Dalio’s Bridgewater Associates sold off the largest investment of the 700 funds tracked by Insider Monkey, totaling close to $2.3 million in stock. Murray Stahl’s fund, Horizon Asset Management, also said goodbye to its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total 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 PetroChina Company Limited (NYSE:PTR). We will take a look at Unilever plc (NYSE:UL), Unilever N.V. (NYSE:UN), DowDuPont Inc. (NYSE:DWDP), and AbbVie Inc (NYSE:ABBV). All of these stocks’ market caps are similar to PTR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UL 14 137235 1
UN 14 1117559 0
DWDP 69 4551261 -6
ABBV 40 3740625 -6
Average 34.25 2386670 -2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $2.39 billion. That figure was $170 million in PTR’s case. DowDuPont Inc. (NYSE:DWDP) is the most popular stock in this table. On the other hand Unilever plc (NYSE:UL) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks PetroChina Company Limited (NYSE:PTR) is even less popular than UL. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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