The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Devon Energy Corporation (NYSE:DVN).
Is DVN a good stock to buy now? Devon Energy Corporation (NYSE:DVN) was in 44 hedge funds’ portfolios at the end of September. The all time high for this statistic is 61. DVN shareholders have witnessed a decrease in hedge fund sentiment of late. There were 45 hedge funds in our database with DVN holdings at the end of June. Our calculations also showed that DVN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a look at the recent hedge fund action encompassing Devon Energy Corporation (NYSE:DVN).
Do Hedge Funds Think DVN Is A Good Stock To Buy Now?
At third quarter’s end, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the previous quarter. On the other hand, there were a total of 42 hedge funds with a bullish position in DVN a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Devon Energy Corporation (NYSE:DVN) was held by Holocene Advisors, which reported holding $53.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $48 million position. Other investors bullish on the company included Citadel Investment Group, D E Shaw, and Renaissance Technologies. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Devon Energy Corporation (NYSE:DVN), around 4.57% of its 13F portfolio. Deep Basin Capital is also relatively very bullish on the stock, setting aside 4.3 percent of its 13F equity portfolio to DVN.
Judging by the fact that Devon Energy Corporation (NYSE:DVN) has witnessed declining sentiment from hedge fund managers, we can see that there were a few money managers that elected to cut their positions entirely in the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest position of the 750 funds tracked by Insider Monkey, valued at an estimated $3 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund cut about $2.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Devon Energy Corporation (NYSE:DVN). These stocks are Madison Square Garden Sports Corp. (NYSE:MSGS), Rayonier Inc. (NYSE:RYN), Eagle Materials, Inc. (NYSE:EXP), Grocery Outlet Holding Corp. (NASDAQ:GO), Halozyme Therapeutics, Inc. (NASDAQ:HALO), Rexnord Corp (NYSE:RXN), and SailPoint Technologies Holdings, Inc. (NYSE:SAIL). This group of stocks’ market valuations match DVN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $451 million. That figure was $538 million in DVN’s case. Madison Square Garden Sports Corp. (NYSE:MSGS) is the most popular stock in this table. On the other hand Rayonier Inc. (NYSE:RYN) is the least popular one with only 17 bullish hedge fund positions. Devon Energy Corporation (NYSE:DVN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DVN is 69.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on DVN as the stock returned 68.8% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.