How Do Hedge Funds View Two Energy Stocks Whose Credit Outlook was Downgraded by S&P?

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Hedge funds were not enthusiastic about Exxon Mobil Corporation (NYSE:XOM) in the second quarter. At the end of June, hedge funds from our database owned just 1% of the company’s outstanding stock. The aggregate value of their stakes declined by 9.28% from the previous quarter to $3.64 billion, not fully accounted for by the 2.12% drop in the stock’s price. There were, however, more hedge funds with long positions on Exxon Mobil by the end of the second quarter, as 67 hedge funds from out database were long Exxon Mobil, up by four from the end of March. Donald Yacktman’s Yacktman Asset Management owned just over 6 million Exxon Mobil shares at the end of the second quarter, down 14% from the first quarter but still the largest stake among the funds we track.

Meanwhile, Chevron Corporation (NYSE:CVX)’s long-term corporate credit rating and short-term commercial paper ratings were also affirmed by S&P at “AA” and “A-1+,” respectively. However, like its fellow energy behemoth, its outlook was downgraded to “Negative” from “Stable”. According to the ratings firm, the downgrade reflects their expectation that Chevron’s credit measures will be weak in the ratings next year because of lower oil and gas prices and refining margins. It said that Chevron is expected to outspend internally generated cash flow while it has more debt than the last time oil prices and margins were trending lower.

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Hedge funds that we track were not fond of Chevron Corporation (NYSE:CVX) in the second quarter either, ending the period with just 1.20% of all of the firm’s shares. The value of stakes of 50 hedge funds in our database, which were long Chevron at the end of June, totaled $2.11 billion. However, it should be noted that the trend may be improving for Chevron as there were 47 hedge funds long the company in the previous quarter, and the value of their stakes was 40% lower than in the second quarter. This increase in the value of hedge fund holdings is despite the firm’s stock slipping over 8% in the April-to-June quarter. D.E. Shaw & Co., L.P., managed by David E. Shaw, owned 3.96 million shares of Chevron at the end of June, after having boosted its stake during the quarter.

Disclosure: None

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