Is Petroleo Brasileiro S.A. – Petrobras (PBR) A Good Stock To Buy?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR).

Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) shareholders have witnessed a decrease in hedge fund interest lately. PBR was in 30 hedge funds’ portfolios at the end of September. There were 32 hedge funds in our database with PBR positions at the end of the previous quarter. Our calculations also showed that PBR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most shareholders, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are over 8000 funds with their doors open at present, We choose to focus on the aristocrats of this club, about 750 funds. These money managers preside over the lion’s share of the smart money’s total capital, and by keeping track of their highest performing stock picks, Insider Monkey has formulated numerous investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Ken Heebner of Capital Growth Management

Ken Heebner of Capital Growth Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action regarding Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR).

What have hedge funds been doing with Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR)?

At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PBR over the last 17 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).


More specifically, Renaissance Technologies was the largest shareholder of Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), with a stake worth $628.4 million reported as of the end of September. Trailing Renaissance Technologies was Fisher Asset Management, which amassed a stake valued at $561.8 million. Contrarian Capital, HBK Investments, and Capital Growth Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), around 9.65% of its portfolio. Prince Street Capital Management is also relatively very bullish on the stock, earmarking 8.98 percent of its 13F equity portfolio to PBR.

Because Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedgies that elected to cut their positions entirely last quarter. Intriguingly, Jeffrey Talpins’s Element Capital Management sold off the largest position of the 750 funds monitored by Insider Monkey, worth an estimated $26.6 million in stock, and Joseph Samuels’s Islet Management was right behind this move, as the fund dropped about $13.6 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) but similarly valued. These stocks are PetroChina Company Limited (NYSE:PTR), QUALCOMM, Incorporated (NASDAQ:QCOM), Charter Communications, Inc. (NASDAQ:CHTR), and Rio Tinto Group (NYSE:RIO). This group of stocks’ market caps are similar to PBR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTR 11 106487 2
QCOM 55 1817218 -6
CHTR 63 8306950 -3
RIO 21 1491441 -3
Average 37.5 2930524 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $2931 million. That figure was $2023 million in PBR’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 11 bullish hedge fund positions. Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PBR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PBR investors were disappointed as the stock returned 2.4% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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