In this article we will take a look at whether hedge funds think China Petroleum & Chemical Corp (NYSE:SNP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is SNP a good stock to buy now? Prominent investors were getting less optimistic. The number of long hedge fund positions went down by 2 lately. China Petroleum & Chemical Corp (NYSE:SNP) was in 8 hedge funds’ portfolios at the end of September. The all time high for this statistics is 15. Our calculations also showed that SNP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 10 hedge funds in our database with SNP positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s review the key hedge fund action surrounding China Petroleum & Chemical Corp (NYSE:SNP).
What does smart money think about China Petroleum & Chemical Corp (NYSE:SNP)?
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SNP over the last 21 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in China Petroleum & Chemical Corp (NYSE:SNP), which was worth $128.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $31.8 million worth of shares. Marshall Wace LLP, Citadel Investment Group, and CSat Investment Advisory 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 CSat Investment Advisory allocated the biggest weight to China Petroleum & Chemical Corp (NYSE:SNP), around 0.15% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to SNP.
Seeing as China Petroleum & Chemical Corp (NYSE:SNP) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies that slashed their positions entirely in the third quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors dropped the biggest investment of all the hedgies monitored by Insider Monkey, worth an estimated $2.6 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $2.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as China Petroleum & Chemical Corp (NYSE:SNP) but similarly valued. We will take a look at Lam Research Corporation (NASDAQ:LRCX), Waste Management, Inc. (NYSE:WM), Aon plc (NYSE:AON), The Charles Schwab Corporation (NYSE:SCHW), The PNC Financial Services Group Inc. (NYSE:PNC), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), and Ferrari N.V. (NYSE:RACE). This group of stocks’ market values resemble SNP’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.4 hedge funds with bullish positions and the average amount invested in these stocks was $2408 million. That figure was $169 million in SNP’s case. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks China Petroleum & Chemical Corp (NYSE:SNP) is even less popular than PBR. Our overall hedge fund sentiment score for SNP is 19. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on SNP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on SNP as the stock returned 19.6% since Q3 (through December 2nd) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.