Hedge Funds Started Dumping Suncor Energy Inc. (SU) Even Before Coronavirus

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Suncor Energy Inc. (NYSE:SU).

Suncor Energy Inc. (NYSE:SU) has seen a decrease in enthusiasm from smart money lately. SU was in 39 hedge funds’ portfolios at the end of December. There were 41 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 Q4 rankings and see the video below for Q3 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.

At the moment there are a lot of formulas investors use to analyze their stock investments. A pair of the most under-the-radar formulas are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the S&P 500 by a healthy amount (see the details here).

Warren Buffett of Berkshire Hathaway

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to review the latest hedge fund action regarding Suncor Energy Inc. (NYSE:SU).

What does smart money think about Suncor Energy Inc. (NYSE:SU)?

Heading into the first quarter of 2020, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the third quarter of 2019. On the other hand, there were a total of 30 hedge funds with a bullish position in SU a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SU A Good Stock To Buy?

More specifically, Berkshire Hathaway was the largest shareholder of Suncor Energy Inc. (NYSE:SU), with a stake worth $492.6 million reported as of the end of September. Trailing Berkshire Hathaway was Lyrical Asset Management, which amassed a stake valued at $304.2 million. Two Sigma Advisors, Citadel Investment Group, and GLG Partners 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 Heathbridge Capital Management allocated the biggest weight to Suncor Energy Inc. (NYSE:SU), around 6.28% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, dishing out 6.25 percent of its 13F equity portfolio to SU.

Seeing as Suncor Energy Inc. (NYSE:SU) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers that slashed their full holdings in the third quarter. Intriguingly, Anand Parekh’s Alyeska Investment Group dumped the biggest investment of all the hedgies followed by Insider Monkey, totaling close to $30.1 million in stock. Joe DiMenna’s fund, ZWEIG DIMENNA PARTNERS, also said goodbye to its stock, about $7.5 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Suncor Energy Inc. (NYSE:SU). We will take a look at HCA Healthcare Inc (NYSE:HCA), TransCanada Corporation (NYSE:TRP), Equinix Inc (NASDAQ:EQIX), and Honda Motor Co Ltd (NYSE:HMC). 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
HCA 63 3585533 3
TRP 22 210177 2
EQIX 43 1639342 3
HMC 9 148249 -2
Average 34.25 1395825 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $1396 million. That figure was $1487 million in SU’s case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 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 -41.7% during the same time period 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.