Hedge Funds Never Been Less Bullish On WPX Energy Inc (WPX)

In this article you are going to find out whether hedge funds think WPX Energy Inc (NYSE:WPX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

WPX Energy Inc (NYSE:WPX) was in 29 hedge funds’ portfolios at the end of March. WPX shareholders have witnessed a decrease in hedge fund interest recently. There were 44 hedge funds in our database with WPX holdings at the end of the previous quarter. Our calculations also showed that WPX 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.

In the financial world there are many methods investors can use to grade stocks. A couple of the most useful methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outclass the broader indices by a significant amount (see the details here).


Leon Cooperman of Omega Advisors

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 one as well as this tiny lithium play. 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. Now let’s take a glance at the recent hedge fund action regarding WPX Energy Inc (NYSE:WPX).

Hedge fund activity in WPX Energy Inc (NYSE:WPX)

Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -34% from the fourth quarter of 2019. On the other hand, there were a total of 42 hedge funds with a bullish position in WPX 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.

The largest stake in WPX Energy Inc (NYSE:WPX) was held by Southport Management, which reported holding $244 million worth of stock at the end of September. It was followed by Adage Capital Management with a $63.3 million position. Other investors bullish on the company included AQR Capital Management, Omega Advisors, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Southport Management allocated the biggest weight to WPX Energy Inc (NYSE:WPX), around 2.72% of its 13F portfolio. Omega Advisors is also relatively very bullish on the stock, dishing out 2.53 percent of its 13F equity portfolio to WPX.

Judging by the fact that WPX Energy Inc (NYSE:WPX) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedge funds that decided to sell off their positions entirely by the end of the first quarter. It’s worth mentioning that Jonathan Barrett and Paul Segal’s Luminus Management dropped the biggest investment of all the hedgies watched by Insider Monkey, valued at close to $30.1 million in stock, and Renaissance Technologies was right behind this move, as the fund dumped about $27.6 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 15 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as WPX Energy Inc (NYSE:WPX) but similarly valued. These stocks are PennyMac Financial Services Inc (NYSE:PFSI), PJT Partners Inc (NYSE:PJT), Helmerich & Payne, Inc. (NYSE:HP), and Hancock Whitney Corporation (NASDAQ:HWC). This group of stocks’ market caps are similar to WPX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFSI 24 210160 8
PJT 22 88247 2
HP 27 114660 -6
HWC 20 40474 4
Average 23.25 113385 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $412 million in WPX’s case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand Hancock Whitney Corporation (NASDAQ:HWC) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks WPX Energy Inc (NYSE:WPX) is more popular among hedge funds. 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 returned 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on WPX as the stock returned 85.9% so far in Q2 (through the end of May) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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