Hedge Funds Have Never Been This Bullish On Suncor Energy Inc. (SU)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Suncor Energy Inc. (NYSE:SU).

Suncor Energy Inc. (NYSE:SU) was in 37 hedge funds’ portfolios at the end of the third quarter of 2019. SU investors should be aware of an increase in enthusiasm from smart money lately. There were 32 hedge funds in our database with SU holdings at the end of the previous quarter. Our calculations also showed that SU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Warren Buffett of Berkshire Hathaway

Warren Buffett of Berkshire Hathaway

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the latest hedge fund action encompassing Suncor Energy Inc. (NYSE:SU).

How have hedgies been trading Suncor Energy Inc. (NYSE:SU)?

Heading into the fourth quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. On the other hand, there were a total of 36 hedge funds with a bullish position in SU a year ago. 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 SU Positions

Among these funds, Berkshire Hathaway held the most valuable stake in Suncor Energy Inc. (NYSE:SU), which was worth $339.7 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $276.5 million worth of shares. Two Sigma Advisors, D E Shaw, and Citadel Investment Group 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 Soapstone Capital allocated the biggest weight to Suncor Energy Inc. (NYSE:SU), around 9.03% of its portfolio. Lyrical Asset Management is also relatively very bullish on the stock, dishing out 4.16 percent of its 13F equity portfolio to SU.

Consequently, specific money managers have jumped into Suncor Energy Inc. (NYSE:SU) headfirst. Everett Capital Advisors, managed by Kelly Hampaul, initiated the most outsized call position in Suncor Energy Inc. (NYSE:SU). Everett Capital Advisors had $4.4 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $2.7 million position during the quarter. The other funds with new positions in the stock are Parvinder Thiara’s Athanor Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners.

Let’s check out hedge fund activity in other stocks similar to Suncor Energy Inc. (NYSE:SU). These stocks are America Movil, S.A.B. de C.V. (NYSE:AMX), Equinix, Inc. (REIT) (NASDAQ:EQIX), Air Products and Chemicals, Inc. (NYSE:APD), and Kimberly-Clark Corporation (NYSE:KMB). All of these stocks’ market caps match SU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMX 9 188555 0
EQIX 33 1580931 -5
APD 38 478746 6
KMB 40 1622264 0
Average 30 967624 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $968 million. That figure was $1417 million in SU’s case. Kimberly-Clark Corporation (NYSE:KMB) is the most popular stock in this table. On the other hand America Movil, S.A.B. de C.V. (NYSE:AMX) is the least popular one with only 9 bullish hedge fund positions. Suncor Energy Inc. (NYSE:SU) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately SU wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SU were disappointed as the stock returned -0.6% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.

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