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Here’s What Hedge Funds Think About Imperial Oil Limited (IMO)

Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors’ favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds’ top consensus picks. This year hedge funds’ top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.

Imperial Oil Limited (NYSE:IMO) was in 17 hedge funds’ portfolios at the end of the first quarter of 2019. IMO has experienced a decrease in hedge fund sentiment of late. There were 19 hedge funds in our database with IMO positions at the end of the previous quarter. Our calculations also showed that imo isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Let’s check out the key hedge fund action surrounding Imperial Oil Limited (NYSE:IMO).

What have hedge funds been doing with Imperial Oil Limited (NYSE:IMO)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2018. By comparison, 8 hedge funds held shares or bullish call options in IMO 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.

No of Hedge Funds with IMO Positions

More specifically, AQR Capital Management was the largest shareholder of Imperial Oil Limited (NYSE:IMO), with a stake worth $18.4 million reported as of the end of March. Trailing AQR Capital Management was SIR Capital Management, which amassed a stake valued at $13 million. D E Shaw, Point72 Asset Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Since Imperial Oil Limited (NYSE:IMO) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of funds that decided to sell off their positions entirely last quarter. It’s worth mentioning that Thomas E. Claugus’s GMT Capital cut the biggest investment of all the hedgies tracked by Insider Monkey, worth about $1.8 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $1.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Imperial Oil Limited (NYSE:IMO) but similarly valued. We will take a look at United Continental Holdings Inc (NASDAQ:UAL), Cintas Corporation (NASDAQ:CTAS), FleetCor Technologies, Inc. (NYSE:FLT), and Hewlett Packard Enterprise Company (NYSE:HPE). This group of stocks’ market caps are closest to IMO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UAL 49 6333893 0
CTAS 27 525445 -2
FLT 34 1733702 1
HPE 30 967419 1
Average 35 2390115 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $2390 million. That figure was $85 million in IMO’s case. United Continental Holdings Inc (NASDAQ:UAL) is the most popular stock in this table. On the other hand Cintas Corporation (NASDAQ:CTAS) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Imperial Oil Limited (NYSE:IMO) is even less popular than CTAS. Hedge funds dodged a bullet by taking a bearish stance towards IMO. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately IMO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IMO investors were disappointed as the stock returned 1.9% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.

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

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