Is Pioneer Natural Resources Company (NYSE:PXD) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Pioneer Natural Resources Company (NYSE:PXD) the right investment to pursue these days? The best stock pickers are selling. The number of long hedge fund positions dropped by 1 in recent months. Our calculations also showed that PXD isn’t among the 30 most popular stocks among hedge funds. PXD was in 47 hedge funds’ portfolios at the end of September. There were 48 hedge funds in our database with PXD positions at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 latest hedge fund action regarding Pioneer Natural Resources Company (NYSE:PXD).
How are hedge funds trading Pioneer Natural Resources Company (NYSE:PXD)?
Heading into the fourth quarter of 2019, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PXD over the last 17 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Abrams Bison Investments, managed by Gavin M. Abrams, holds the number one position in Pioneer Natural Resources Company (NYSE:PXD). Abrams Bison Investments has a $188.7 million position in the stock, comprising 18.8% of its 13F portfolio. On Abrams Bison Investments’s heels is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $169.6 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that are bullish contain Steve Cohen’s Point72 Asset Management, Todd J. Kantor’s Encompass Capital Advisors and John W. Rogers’s Ariel Investments. In terms of the portfolio weights assigned to each position Abrams Bison Investments allocated the biggest weight to Pioneer Natural Resources Company (NYSE:PXD), around 18.84% of its portfolio. Covalent Capital Partners is also relatively very bullish on the stock, earmarking 13.84 percent of its 13F equity portfolio to PXD.
Seeing as Pioneer Natural Resources Company (NYSE:PXD) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group cut the biggest position of the “upper crust” of funds watched by Insider Monkey, valued at about $19.1 million in call options, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $14.4 million worth. These transactions are important to note, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks similar to Pioneer Natural Resources Company (NYSE:PXD). These stocks are AMETEK, Inc. (NYSE:AME), Corteva, Inc. (NYSE:CTVA), Tencent Music Entertainment Group (NYSE:TME), and Zoom Video Communications, Inc. (NASDAQ:ZM). All of these stocks’ market caps are similar to PXD’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $567 million. That figure was $1014 million in PXD’s case. Corteva, Inc. (NYSE:CTVA) is the most popular stock in this table. On the other hand Tencent Music Entertainment Group (NYSE:TME) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Pioneer Natural Resources Company (NYSE:PXD) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately PXD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PXD were disappointed as the stock returned 3% during the fourth quarter (through 11/22) 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.