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Hedge Fund Darlings vs. Chevron Corporation (CVX) In 2019

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 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. 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 Chevron Corporation (NYSE:CVX).

Chevron Corporation (NYSE:CVX) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that CVX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are plenty of metrics market participants have at their disposal to size up publicly traded companies. Some of the best metrics are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outclass the market by a significant amount (see the details here).

Ken Fisher FISHER ASSET MANAGEMENT

Ken Fisher of Fisher Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a glance at the new hedge fund action surrounding Chevron Corporation (NYSE:CVX).

What does smart money think about Chevron Corporation (NYSE:CVX)?

At Q3’s end, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 56 hedge funds with a bullish position in CVX a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is CVX A Good Stock To Buy?

Among these funds, Fisher Asset Management held the most valuable stake in Chevron Corporation (NYSE:CVX), which was worth $612.3 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $311.6 million worth of shares. Adage Capital Management, Diamond Hill Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Chevron Corporation (NYSE:CVX), around 5.38% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, designating 2.25 percent of its 13F equity portfolio to CVX.

Consequently, key hedge funds were leading the bulls’ herd. Renaissance Technologies, initiated the largest position in Chevron Corporation (NYSE:CVX). Renaissance Technologies had $57.5 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $55.5 million investment in the stock during the quarter. The other funds with brand new CVX positions are Brandon Haley’s Holocene Advisors, Vince Maddi and Shawn Brennan’s SIR Capital Management, and Matthew Tewksbury’s Stevens Capital Management.

Let’s check out hedge fund activity in other stocks similar to Chevron Corporation (NYSE:CVX). We will take a look at Wells Fargo & Company (NYSE:WFC), Merck & Co., Inc. (NYSE:MRK), The Boeing Company (NYSE:BA), and Cisco Systems, Inc. (NASDAQ:CSCO). This group of stocks’ market caps are similar to CVX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WFC 62 25231139 -3
MRK 73 4568239 3
BA 78 3964531 4
CSCO 58 4154237 3
Average 67.75 9479537 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 67.75 hedge funds with bullish positions and the average amount invested in these stocks was $9480 million. That figure was $1776 million in CVX’s case. The Boeing Company (NYSE:BA) is the most popular stock in this table. On the other hand Cisco Systems, Inc. (NASDAQ:CSCO) is the least popular one with only 58 bullish hedge fund positions. Compared to these stocks Chevron Corporation (NYSE:CVX) is even less popular than CSCO. Hedge funds dodged a bullet by taking a bearish stance towards CVX. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately CVX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CVX investors were disappointed as the stock returned 15.1% in 2019 (through December 23rd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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