A market correction in the third quarter, spurred by a number of global macroeconomic concerns ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by 14 percentage points between June 25 and the end of October. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let’s study the hedge fund sentiment to see how those concerns affected their ownership of Newfield Exploration Co. (NYSE:NFX) during the quarter.
Newfield Exploration Co. (NYSE:NFX) was in 43 hedge funds’ portfolios at the end of September. Newfield Exploration Co. (NYSE:NFX) investors should be aware of a decrease in hedge fund interest lately. There were 55 hedge funds in our database with Newfield Exploration Co. (NYSE:NFX) positions at the end of the previous quarter. 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 Enable Midstream Partners LP (NYSE:ENBL), Liberty Broadband Corp (NASDAQ:LBRDA), and Hain Celestial Group, Inc. (NASDAQ:HAIN) to gather more data points.
According to most investors, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are more than 8000 funds trading at the moment, our researchers hone in on the masters of this club, approximately 700 funds. It is estimated that this group of investors shepherd the majority of the smart money’s total capital, and by keeping an eye on their first-class equity investments, Insider Monkey has uncovered a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
Keeping this in mind, let’s analyze the recent action encompassing Newfield Exploration Co. (NYSE:NFX).
What does the smart money think about Newfield Exploration Co. (NYSE:NFX)?
At the end of Q3, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 22% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the largest position in Newfield Exploration Co. (NYSE:NFX). Millennium Management has a $133.9 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $72.4 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism comprise John Labanowski’s Brenham Capital Management, Curtis Macnguyen’s Ivory Capital (Investment Mgmt), and Clint Carlson’s Carlson Capital.
Because Newfield Exploration Co. (NYSE:NFX) has experienced a bearish sentiment from hedge fund managers, we can see that there were a few funds that decided to sell off their full holdings heading into Q4. Interestingly, Alec Litowitz and Ross Laser’s Magnetar Capital said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $76 million in stock. George Soros’s fund, Soros Fund Management, also dropped its stock, about $39.7 million worth of shares. These transactions are interesting, as aggregate hedge fund interest was cut by 12 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Newfield Exploration Co. (NYSE:NFX) but similarly valued. We will take a look at Enable Midstream Partners LP (NYSE:ENBL), Liberty Broadband Corp (NASDAQ:LBRDA), Hain Celestial Group, Inc. (NASDAQ:HAIN), and AMC Networks Inc (NASDAQ:AMCX). This group of stocks’ market caps matches Newfield Exploration Co. (NYSE:NFX)’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $769 million in Newfield Exploration Co. (NYSE:NFX)’s case. Hain Celestial Group, Inc. (NASDAQ:HAIN) is the most popular stock in this table. On the other hand, Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks, Newfield Exploration Co. (NYSE:NFX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.