Is Pioneer Natural Resources Company (PXD) Going To Burn These Hedge Funds ?

We can judge whether Pioneer Natural Resources Company (NYSE:PXD) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Pioneer Natural Resources Company (NYSE:PXD) has seen an increase in support from the world’s most elite money managers of late. Our calculations also showed that PXD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Charles Davidson - Wexford Capital

Charles Davidson of Wexford Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let’s go over the latest hedge fund action encompassing Pioneer Natural Resources Company (NYSE:PXD).

How have hedgies been trading Pioneer Natural Resources Company (NYSE:PXD)?

At Q4’s end, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in PXD over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Adage Capital Management held the most valuable stake in Pioneer Natural Resources Company (NYSE:PXD), which was worth $133.9 million at the end of the third quarter. On the second spot was Abrams Bison Investments which amassed $102.5 million worth of shares. King Street Capital, Point72 Asset Management, and Encompass Capital Advisors 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 Abrams Bison Investments allocated the biggest weight to Pioneer Natural Resources Company (NYSE:PXD), around 14.86% of its 13F portfolio. Covalent Capital Partners is also relatively very bullish on the stock, setting aside 12.99 percent of its 13F equity portfolio to PXD.

As aggregate interest increased, key money managers were breaking ground themselves. Senator Investment Group, managed by Doug Silverman and Alexander Klabin, initiated the most outsized position in Pioneer Natural Resources Company (NYSE:PXD). Senator Investment Group had $60.5 million invested in the company at the end of the quarter. Robert Polak’s Anchor Bolt Capital also initiated a $14.5 million position during the quarter. The other funds with new positions in the stock are Charles Davidson and Joseph Jacobs’s Wexford Capital, George Soros’s Soros Fund Management, and Mark Coe’s Intrinsic Edge Capital.

Let’s now review hedge fund activity in other stocks similar to Pioneer Natural Resources Company (NYSE:PXD). We will take a look at Microchip Technology Incorporated (NASDAQ:MCHP), Digital Realty Trust, Inc. (NYSE:DLR), FleetCor Technologies, Inc. (NYSE:FLT), and DTE Energy Company (NYSE:DTE). This group of stocks’ market valuations are closest to PXD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MCHP 46 1428178 14
DLR 26 175397 7
FLT 44 2121544 -1
DTE 35 1090279 12
Average 37.75 1203850 8

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.75 hedge funds with bullish positions and the average amount invested in these stocks was $1204 million. That figure was $1071 million in PXD’s case. Microchip Technology Incorporated (NASDAQ:MCHP) is the most popular stock in this table. On the other hand Digital Realty Trust, Inc. (NYSE:DLR) is the least popular one with only 26 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th and still beat the market by 1.9 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 -56.2% during the first two months of 2020 (through March 9th) 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 most of these stocks already outperformed the market in Q1.

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