How do we determine whether Southwestern Energy Company (NYSE:SWN) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Southwestern Energy Company (NYSE:SWN) the right investment to pursue these days? The smart money is turning bullish. The number of bullish hedge fund bets moved up by 2 recently. Our calculations also showed that SWN 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s go over the new hedge fund action regarding Southwestern Energy Company (NYSE:SWN).
How have hedgies been trading Southwestern Energy Company (NYSE:SWN)?
At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SWN over the last 14 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Southwestern Energy Company (NYSE:SWN) was held by Bridgewater Associates, which reported holding $44.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $29.5 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Fisher Asset Management.
Consequently, key money managers have jumped into Southwestern Energy Company (NYSE:SWN) headfirst. Portolan Capital Management, managed by George McCabe, initiated the biggest position in Southwestern Energy Company (NYSE:SWN). Portolan Capital Management had $1.7 million invested in the company at the end of the quarter. David Costen Haley’s HBK Investments also initiated a $1.1 million position during the quarter. The following funds were also among the new SWN investors: Minhua Zhang’s Weld Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Mike Vranos’s Ellington.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Southwestern Energy Company (NYSE:SWN) but similarly valued. These stocks are Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), trivago N.V. (NASDAQ:TRVG), Independent Bank Corp (NASDAQ:INDB), and The Cheesecake Factory Incorporated (NASDAQ:CAKE). This group of stocks’ market caps resemble SWN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBA | 3 | 29611 | 0 |
| TRVG | 13 | 162466 | 4 |
| INDB | 9 | 12433 | 2 |
| CAKE | 21 | 176981 | 0 |
| Average | 11.5 | 95373 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $190 million in SWN’s case. The Cheesecake Factory Incorporated (NASDAQ:CAKE) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Southwestern Energy Company (NYSE:SWN) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on SWN, though not to the same extent, as the stock returned 22% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
