Hedge Funds Are Selling Suncor Energy Inc. (SU)

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 Suncor Energy Inc. (NYSE:SU) based on that data.

Is Suncor Energy Inc. (NYSE:SU) a bargain? The best stock pickers are reducing their bets on the stock. The number of long hedge fund bets went down by 9 recently. Our calculations also showed that SU 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.

To most market participants, hedge funds are assumed to be slow, old investment tools of the past. While there are over 8000 funds with their doors open today, Our experts look at the crème de la crème of this club, approximately 850 funds. Most estimates calculate that this group of people shepherd bulk of the smart money’s total asset base, and by watching their top investments, Insider Monkey has formulated several investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Warren Buffett

Warren Buffett of Berkshire Hathaway

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this oneWe interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the recent hedge fund action regarding Suncor Energy Inc. (NYSE:SU).

What have hedge funds been doing with Suncor Energy Inc. (NYSE:SU)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SU over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Berkshire Hathaway was the largest shareholder of Suncor Energy Inc. (NYSE:SU), with a stake worth $236.2 million reported as of the end of September. Trailing Berkshire Hathaway was Lyrical Asset Management, which amassed a stake valued at $134.9 million. D E Shaw, Citadel Investment Group, and Arrowstreet Capital 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 Lyrical Asset Management allocated the biggest weight to Suncor Energy Inc. (NYSE:SU), around 3.31% of its 13F portfolio. Heronetta Management is also relatively very bullish on the stock, earmarking 2.6 percent of its 13F equity portfolio to SU.

Due to the fact that Suncor Energy Inc. (NYSE:SU) has faced falling interest from the entirety of the hedge funds we track, logic holds that there were a few money managers who were dropping their full holdings by the end of the first quarter. At the top of the heap, Brian Ashford-Russell and Tim Woolley’s Polar Capital dumped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $37.8 million in stock. Robert Richards’s fund, Heathbridge Capital Management, also cut its stock, about $30.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 9 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Suncor Energy Inc. (NYSE:SU) but similarly valued. These stocks are Republic Services, Inc. (NYSE:RSG), IHS Markit Ltd. (NYSE:INFO), eBay Inc (NASDAQ:EBAY), and Telefonica S.A. (NYSE:TEF). This group of stocks’ market caps are closest to SU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RSG 32 709358 6
INFO 44 1159316 15
EBAY 52 3096036 1
TEF 7 16531 -2
Average 33.75 1245310 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $1245 million. That figure was $766 million in SU’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 7 bullish hedge fund positions. Suncor Energy Inc. (NYSE:SU) 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. 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 gained 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately SU wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SU investors were disappointed as the stock returned 8.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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