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Here is How Hedge Funds Traded Chevron Corporation (CVX) During The Crash

In this article we will take a look at whether hedge funds think Chevron Corporation (NYSE:CVX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Chevron Corporation (NYSE:CVX) was in 53 hedge funds’ portfolios at the end of March. CVX investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 47 hedge funds in our database with CVX holdings at the end of the previous quarter. Our calculations also showed that CVX 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.

According to most market participants, hedge funds are viewed as unimportant, old investment tools of yesteryear. While there are more than 8000 funds with their doors open today, We choose to focus on the upper echelon of this club, around 850 funds. These money managers control the lion’s share of all hedge funds’ total asset base, and by observing their top equity investments, Insider Monkey has figured out a number of investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a glance at the new hedge fund action encompassing Chevron Corporation (NYSE:CVX).

How have hedgies been trading Chevron Corporation (NYSE:CVX)?

Heading into the second quarter of 2020, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CVX over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Chevron Corporation (NYSE:CVX), which was worth $369.3 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $279.8 million worth of shares. Citadel Investment Group, Adage Capital Management, and D E Shaw 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 Meru Capital allocated the biggest weight to Chevron Corporation (NYSE:CVX), around 15.78% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, designating 7.59 percent of its 13F equity portfolio to CVX.

Consequently, key money managers have jumped into Chevron Corporation (NYSE:CVX) headfirst. Holocene Advisors, managed by Brandon Haley, initiated the largest position in Chevron Corporation (NYSE:CVX). Holocene Advisors had $58.9 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $27.8 million position during the quarter. The following funds were also among the new CVX investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Vince Maddi and Shawn Brennan’s SIR Capital Management, and Matt Smith’s Deep Basin Capital.

Let’s now review hedge fund activity in other stocks similar to Chevron Corporation (NYSE:CVX). These stocks are Eli Lilly and Company (NYSE:LLY), The Unilever Group (NYSE:UL), SAP SE (NYSE:SAP), and NIKE, Inc. (NYSE:NKE). This group of stocks’ market values are similar to CVX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LLY 43 1323452 0
UL 13 207786 -4
SAP 15 1386317 -1
NKE 80 2172472 -1
Average 37.75 1272507 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1273 million. That figure was $1646 million in CVX’s case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 13 bullish hedge fund positions. Chevron Corporation (NYSE:CVX) is not the most popular stock in this group but hedge fund interest is still above average. 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on CVX as the stock returned 26.4% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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