Is ConocoPhillips (NYSE:COP) a buy right now? Investors who are in the know are taking a bearish view. The number of bullish hedge fund positions stayed the same which is a slightly negative development in our experience
If you’d ask most shareholders, hedge funds are seen as underperforming, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, we hone in on the top tier of this group, close to 450 funds. Most estimates calculate that this group has its hands on most of all hedge funds’ total asset base, and by paying attention to their top equity investments, we have formulated a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Just as important, optimistic insider trading activity is a second way to break down the financial markets. Obviously, there are a number of stimuli for an executive to sell shares of his or her company, but only one, very clear reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this method if investors understand where to look (learn more here).
With all of this in mind, let’s take a gander at the latest action regarding ConocoPhillips (NYSE:COP).
How have hedgies been trading ConocoPhillips (NYSE:COP)?
Heading into Q2, a total of 38 of the hedge funds we track were bullish in this stock, a change of 0% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly.
Of the funds we track, Berkshire Hathaway, managed by Warren Buffett, holds the biggest position in ConocoPhillips (NYSE:COP). Berkshire Hathaway has a $1.4498 billion position in the stock, comprising 1.7% of its 13F portfolio. Coming in second is Jean-Marie Eveillard of First Eagle Investment Management, with a $532 million position; 1.8% of its 13F portfolio is allocated to the company. Other peers with similar optimism include Donald Yacktman’s Yacktman Asset Management, and Gilchrist Berg’s Water Street Capital.
Judging by the fact that ConocoPhillips (NYSE:COP) has experienced falling interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedge funds that decided to sell off their full holdings heading into Q2. Interestingly, Wayne Cooperman’s Cobalt Capital Management sold off the biggest investment of the 450+ funds we track, worth close to $44 million in stock.. Michael Price’s fund, MFP Investors, also dropped its stock, about $20.1 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
How are insiders trading ConocoPhillips (NYSE:COP)?
Insider purchases made by high-level executives is most useful when the company in question has experienced transactions within the past half-year. Over the latest six-month time period, ConocoPhillips (NYSE:COP) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to ConocoPhillips (NYSE:COP). These stocks are Ecopetrol S.A. (ADR) (NYSE:EC), China Petroleum & Chemical Corp (ADR) (NYSE:SNP), Occidental Petroleum Corporation (NYSE:OXY), Eni SpA (ADR) (NYSE:E), and Statoil ASA (ADR) (NYSE:STO). This group of stocks belong to the major integrated oil & gas industry and their market caps are closest to COP’s market cap.