Is BP plc (BP) Going to Burn These Hedge Funds?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of BP plc (NYSE:BP).

Hedge fund interest in BP plc (NYSE:BP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Canadian National Railway Company (NYSE:CNI), Gilead Sciences, Inc. (NASDAQ:GILD), and Automatic Data Processing (NASDAQ:ADP) to gather more data points.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.


Jeffrey Ubben of ValueAct Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to analyze the key hedge fund action surrounding BP plc (NYSE:BP).

Do Hedge Funds Think BP Is A Good Stock To Buy Now?

At the end of March, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BP over the last 23 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Is BP A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the most valuable position in BP plc (NYSE:BP). Arrowstreet Capital has a $423.3 million position in the stock, comprising 0.6% of its 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, holding a $279.3 million position; 0.2% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include  Renaissance Technologies, Ken Griffin’s Citadel Investment Group and William B. Gray’s Orbis Investment Management. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to BP plc (NYSE:BP), around 7.21% of its 13F portfolio. Stamos Capital is also relatively very bullish on the stock, earmarking 3.27 percent of its 13F equity portfolio to BP.

Due to the fact that BP plc (NYSE:BP) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of money managers who were dropping their full holdings heading into Q2. Intriguingly, Jeff Ubben’s Inclusive Capital sold off the biggest position of all the hedgies watched by Insider Monkey, totaling an estimated $61 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund sold off about $9.9 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BP plc (NYSE:BP) but similarly valued. These stocks are Canadian National Railway Company (NYSE:CNI), Gilead Sciences, Inc. (NASDAQ:GILD), Automatic Data Processing (NASDAQ:ADP), Fiserv, Inc. (NASDAQ:FISV), Infosys Limited (NYSE:INFY), The TJX Companies, Inc. (NYSE:TJX), and Snap Inc. (NYSE:SNAP). All of these stocks’ market caps are closest to BP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNI 36 4705189 5
GILD 65 2689659 -7
ADP 42 2924374 -6
FISV 75 2748118 -19
INFY 26 2011419 3
TJX 63 2348057 -5
SNAP 73 4324308 10
Average 54.3 3107303 -2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.3 hedge funds with bullish positions and the average amount invested in these stocks was $3107 million. That figure was $1244 million in BP’s case. Fiserv, Inc. (NASDAQ:FISV) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 26 bullish hedge fund positions. BP plc (NYSE:BP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BP is 29.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and beat the market by 6 percentage points. A small number of hedge funds were also right about betting on BP, though not to the same extent, as the stock returned 12.1% since the end of Q1 (through July 2nd) and outperformed the market.

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