Do Hedge Funds Love Valero Energy Corporation (VLO)?

Insider Monkey has processed numerous 13F filings of hedge funds and famous investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds and investors’ positions as of the end of the third quarter. You can find write-ups 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 and analyze what the smart money thinks of Valero Energy Corporation (NYSE:VLO) based on that data.

Valero Energy Corporation (NYSE:VLO) was in 34 hedge funds’ portfolios at the end of September. VLO has experienced an increase in hedge fund sentiment of late. There were 32 hedge funds in our database with VLO holdings at the end of the previous quarter. Our calculations also showed that vlo isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Cliff Asness of AQR Capital Management

Let’s view the key hedge fund action regarding Valero Energy Corporation (NYSE:VLO).

What does the smart money think about Valero Energy Corporation (NYSE:VLO)?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 29 hedge funds with a bullish position in VLO at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with VLO Positions

Among these funds, AQR Capital Management held the most valuable stake in Valero Energy Corporation (NYSE:VLO), which was worth $848.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $142.4 million worth of shares. Moreover, Two Sigma Advisors, Citadel Investment Group, and Blue Mountain Capital were also bullish on Valero Energy Corporation (NYSE:VLO), allocating a large percentage of their portfolios to this stock.

Consequently, some big names were breaking ground themselves. Discovery Capital Management, managed by Rob Citrone, initiated the biggest position in Valero Energy Corporation (NYSE:VLO). Discovery Capital Management had $18 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also made a $10.4 million investment in the stock during the quarter. The following funds were also among the new VLO investors: Ken Griffin’s Citadel Investment Group, Jim Simons’s Renaissance Technologies, and Guy Shahar’s DSAM Partners.

Let’s now review hedge fund activity in other stocks similar to Valero Energy Corporation (NYSE:VLO). These stocks are Deere & Company (NYSE:DE), HCA Healthcare Inc (NYSE:HCA), Emerson Electric Co. (NYSE:EMR), and General Motors Company (NYSE:GM). This group of stocks’ market values are similar to VLO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DE 37 2729209 -14
HCA 46 3198514 1
EMR 32 885823 2
GM 61 4747247 2
Average 44 2890198 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 44 hedge funds with bullish positions and the average amount invested in these stocks was $2.89 billion. That figure was $1.27 billion in VLO’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Emerson Electric Co. (NYSE:EMR) is the least popular one with only 32 bullish hedge fund positions. Valero Energy Corporation (NYSE:VLO) 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. In this regard GM might be a better candidate to consider a long position.

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