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PBF Energy Inc (PBF) Surges On Exxon (XOM) Refinery Deal: Is It A Good Buy Now?

PBF Energy Inc (NYSE:PBF) surged 13.5% on Thursday following the announcement that the petroleum refiner and supplier is planning to acquire Chalmette Refinery, a joint venture between Exxon Mobil Corporation (NYSE:XOM) and Venezuela’s PDVSA, for $322 million. With the addition of Chalmette to its portfolio, PBF Energy Inc (NYSE:PBF) will be able to boost its capacity by an additional 189,000 barrels per day, from its current capacity of 725,000 barrels per day. It is expected that this deal will be able to boost PBF Energy Inc (NYSE:PBF)’s earnings by 20%.


We use hedge fund and insider sentiment to decide whether a stock deserves a more detailed analysis. In the case of PBF Energy Inc (NYSE:PBF), Hedge fund sentiment is positive, as the number of hedge fund positions in the stock went up by 4% by the end of Q1, when compared to the end of Q4, 2014. There were 27 hedge fund positions in the stock at the end of Q1, vs. 26 hedge fund positions at the end of Q4 2014.

But why do we track hedge fund activity? From one point of view we can argue that hedge funds are consistently under performing when it comes to net returns over the last three years, when compared to the S&P 500. But that doesn’t mean that we should completely neglect hedge fund activity. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. A small-cap approach, which includes the top 15 small-cap stock picks of the best hedge fund managers, consistently outperformed the S&P 500 since August 2012, returning 142% since launch, whereas the S&P 500 managed to return less than 60% (see the details). This is the primary reason behind our emphasis on tracking hedge fund activity and sentiment.

Insider sentiments are neutral with respect to PBF Energy Inc (NYSE:PBF), since there were no insider purchases or selling activity filed during the first quarter. With neutral insider sentiment and positive hedge fund sentiment, should this stock be bought at the moment?

Let’s take a look at the latest hedge fund activities on PBF Energy Inc (NYSE:PBF).

How have hedgies been trading PBF Energy Inc (NYSE:PBF)?

Of the hedge funds tracked by Insider Monkey, 27 funds hold positions in the stock, which went up by 4% when compared to 26 funds holding positions in the stock by the end of Q4, 2014. This positive hedge fund sentiment indicates that many hedge fund managers have upped their position in the stock and some might have even initiated new positions in the stock.

Insider Monkey’s hedge fund database indicated that by the end of Q1, the largest position in PBF Energy Inc (NYSE:PBF) was held by Seth Klarman‘s Baupost Group. Baupost Group hold 8.6 million PBF Energy Inc (NYSE:PBF) shares which is worth $293.9 million and accounts for 4.9% of Baupost Group’s 13F portfolio. The second-largest holding in PBF Energy Inc (NYSE:PBF) was held by Robert Joseph Caruso’s Select Equity Group. Select Equity Group holds 4.7 million shares valued at $159.3 million and accounts for 1.4% of Select Equity Group’s 13F portfolio. Other hedge fund names with large holdings in the stock includes D E Shaw, John Griffin‘s Blue Ridge Capital and Terence Hogan’s Addison Clark Management.

With increasing interest from hedge funds on this stock it is quite obvious to assume that some hedge funds might have initiated new positions in the stock. Renaissance Technologies, managed by Jim Simons, initiated the largest position in PBF Energy Inc (NYSE:PBF) in the first quarter. Renaissance Technologies invested $19.1 million in the first quarter in the stock, buying 563,600 shares. The next largest investment was made by Jorge Paulo Lemann’s 3G Capital, which invested $13.6 million in the stock during the quarter, buying 400,000 shares. Other hedge funds which initiated new positions include Anand Parekh’s Alyeska Investment Group, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management, and Lee Munder’s Lee Munder Capital Group.

Overall, we like the positive hedge fund sentiment but we like Seth Klarman’s vote of confidence even more. Historically Seth Klarman’s small and micro-cap picks outperformed the market by a large margin. That’s why we believe PBF Energy Inc is a good long candidate.

Seth Klarman
Seth Klarman
Baupost Group

Disclosure: None

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