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Hedge Funds Dipping Their Toes Back Into Devon Energy Corporation (DVN)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Devon Energy Corporation (NYSE:DVN) and determine whether the smart money was really smart about this stock.

Is Devon Energy Corporation (NYSE:DVN) a safe investment now? Prominent investors were in a bullish mood. The number of long hedge fund positions moved up by 3 lately. Devon Energy Corporation (NYSE:DVN) was in 45 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 61. Our calculations also showed that DVN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Today there are several formulas market participants can use to evaluate their stock investments. A pair of the most innovative formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the market by a significant amount (see the details here).

Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to go over the key hedge fund action surrounding Devon Energy Corporation (NYSE:DVN).

What does smart money think about Devon Energy Corporation (NYSE:DVN)?

Heading into the third quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the first quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in DVN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in Devon Energy Corporation (NYSE:DVN), worth close to $62.9 million, corresponding to 0.1% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $49.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Israel Englander’s Millennium Management, Renaissance Technologies and Ken Fisher’s Fisher Asset Management. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Devon Energy Corporation (NYSE:DVN), around 5.67% of its 13F portfolio. Rutabaga Capital Management is also relatively very bullish on the stock, dishing out 1.82 percent of its 13F equity portfolio to DVN.

Now, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in Devon Energy Corporation (NYSE:DVN). Point72 Asset Management had $10.6 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $2.6 million investment in the stock during the quarter. The following funds were also among the new DVN investors: Greg Poole’s Echo Street Capital Management, Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, and Andy Redleaf’s Whitebox Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Devon Energy Corporation (NYSE:DVN) but similarly valued. These stocks are MAXIMUS, Inc. (NYSE:MMS), Nomad Foods Limited (NYSE:NOMD), Landstar System, Inc. (NASDAQ:LSTR), II-VI, Inc. (NASDAQ:IIVI), CAE, Inc. (NYSE:CAE), Noble Energy, Inc. (NASDAQ:NBL), and Switch, Inc. (NYSE:SWCH). All of these stocks’ market caps are similar to DVN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MMS 26 158400 0
NOMD 34 437867 0
LSTR 23 207278 1
IIVI 28 176363 8
CAE 14 106251 -6
NBL 38 364034 3
SWCH 22 410263 -2
Average 26.4 265779 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $266 million. That figure was $404 million in DVN’s case. Noble Energy, Inc. (NASDAQ:NBL) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Devon Energy Corporation (NYSE:DVN) is more popular among hedge funds. Our overall hedge fund sentiment score for DVN is 80.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately DVN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on DVN were disappointed as the stock returned -2.1% since the end of 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.