Pioneer Natural Resources Company (PXD) Fell Out Of Favor With Hedge Funds

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Pioneer Natural Resources Company (NYSE:PXD).

Is Pioneer Natural Resources Company (NYSE:PXD) a buy, sell, or hold? Hedge funds were getting less bullish. The number of long hedge fund bets fell by 3 in recent months. Pioneer Natural Resources Company (NYSE:PXD) was in 37 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 74. Our calculations also showed that PXD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a glance at the new hedge fund action surrounding Pioneer Natural Resources Company (NYSE:PXD).

Do Hedge Funds Think PXD Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 40 hedge funds with a bullish position in PXD a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the largest position in Pioneer Natural Resources Company (NYSE:PXD). Adage Capital Management has a $192.4 million position in the stock, comprising 0.4% of its 13F portfolio. On Adage Capital Management’s heels is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $91.7 million position; 0.3% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish comprise Zach Schreiber’s Point State Capital, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position SailingStone Capital Partners allocated the biggest weight to Pioneer Natural Resources Company (NYSE:PXD), around 3.8% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, earmarking 2.59 percent of its 13F equity portfolio to PXD.

Due to the fact that Pioneer Natural Resources Company (NYSE:PXD) has experienced bearish sentiment from the smart money, it’s easy to see that there were a few hedgies that decided to sell off their positions entirely by the end of the first quarter. It’s worth mentioning that Michael Gelband’s ExodusPoint Capital cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $26.1 million in stock. Todd J. Kantor’s fund, Encompass Capital Advisors, also dropped its stock, about $23.9 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Pioneer Natural Resources Company (NYSE:PXD). These stocks are Tencent Music Entertainment Group (NYSE:TME), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Hilton Worldwide Holdings Inc (NYSE:HLT), Corning Incorporated (NYSE:GLW), Zimmer Biomet Holdings Inc (NYSE:ZBH), Peloton Interactive, Inc. (NASDAQ:PTON), and Marvell Technology, Inc. (NASDAQ:MRVL). This group of stocks’ market valuations match PXD’s market valuation.

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As you can see these stocks had an average of 52.3 hedge funds with bullish positions and the average amount invested in these stocks was $3019 million. That figure was $623 million in PXD’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Corning Incorporated (NYSE:GLW) is the least popular one with only 32 bullish hedge fund positions. Pioneer Natural Resources Company (NYSE:PXD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PXD is 22.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately PXD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PXD investors were disappointed as the stock returned 4% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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