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 PetroChina Company Limited (ADR) (NYSE:PTR) during the quarter.
The drop in oil prices has sent PetroChina Company Limited (ADR)’s stock in a free fall. The stock is 43% in the red year-to-date and it has seen a decrease in activity from the world’s largest hedge funds lately. At the end of this article we will also compare PTR to other stocks, including Reynolds American, Inc. (NYSE:RAI), Sanofi SA (ADR) (NYSE:SNY), and Philip Morris International Inc. (NYSE:PM) to get a better sense of its popularity.
In the 21st century investor’s toolkit there are a large number of gauges stock market investors use to value their holdings. A pair of the less known gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outpace the S&P 500 by a solid margin (see the details here).
Keeping this in mind, we’re going to take a gander at the recent action regarding PetroChina Company Limited (ADR) (NYSE:PTR).
What does the smart money think about PetroChina Company Limited (ADR) (NYSE:PTR)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a decrease of 17% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Michael Platt and William Reeves’ BlueCrest Capital Mgmt. has the most valuable position in PetroChina Company Limited (ADR) (NYSE:PTR), worth close to $90.6 million, accounting for 3% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies holding a $16.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. The remaining peers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Simon Sadler’s Segantii Capital, and Israel Englander’s Millennium Management.
Seeing as PetroChina Company Limited (ADR) (NYSE:PTR) has witnessed a falling interest from hedge fund managers, logic holds that there exists a select few money managers who sold off their positions entirely heading into Q4. Intriguingly, Matthew Tewksbury’s Stevens Capital Management cut the biggest stake of all the hedgies tracked by Insider Monkey, comprising about $1.1 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dropped its call options, about $1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to PetroChina Company Limited (ADR) (NYSE:PTR). We will take a look at Reynolds American, Inc. (NYSE:RAI), Sanofi SA (ADR) (NYSE:SNY), Philip Morris International Inc. (NYSE:PM), and Unilever N.V. (ADR) (NYSE:UN). This group of stocks’ market valuations resemble PTR’s market valuation.
|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 30 hedge funds with bullish positions and the average amount invested in these stocks was $1.78 billion. That figure was $141 million in PTR’s case. Philip Morris International Inc. (NYSE:PM) is the most popular stock in this table. On the other hand Unilever N.V. (ADR) (NYSE:UN) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks PetroChina Company Limited (ADR) (NYSE:PTR) is even less popular than UN. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.