These Hedge Funds Dumped Occidental Petroleum (OXY) Before The Crash

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Occidental Petroleum Corporation (NYSE:OXY) in this article.

Occidental Petroleum Corporation (NYSE:OXY) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that OXY 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.


Philippe Laffont of Coatue Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the recent hedge fund action encompassing Occidental Petroleum Corporation (NYSE:OXY).

What does smart money think about Occidental Petroleum Corporation (NYSE:OXY)?

Heading into the first quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OXY over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Carl Icahn’s Icahn Capital LP has the largest position in Occidental Petroleum Corporation (NYSE:OXY), worth close to $930.2 million, amounting to 3.6% of its total 13F portfolio. The second largest stake is held by Berkshire Hathaway, led by Warren Buffett, holding a $780.2 million position; 0.3% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise John Murphy’s Levin Easterly Partners, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Levin Capital Strategies allocated the biggest weight to Occidental Petroleum Corporation (NYSE:OXY), around 3.7% of its 13F portfolio. Icahn Capital LP is also relatively very bullish on the stock, dishing out 3.55 percent of its 13F equity portfolio to OXY.

Due to the fact that Occidental Petroleum Corporation (NYSE:OXY) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few fund managers that decided to sell off their positions entirely heading into Q4. It’s worth mentioning that Kenneth Mario Garschina’s Mason Capital Management said goodbye to the largest position of all the hedgies monitored by Insider Monkey, comprising about $132 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $90 million worth. These moves are important to note, as total hedge fund interest fell by 18 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Occidental Petroleum Corporation (NYSE:OXY). These stocks are The Allstate Corporation (NYSE:ALL), Constellation Brands, Inc. (NYSE:STZ), Telefonica S.A. (NYSE:TEF), and Thomson Reuters Corporation (NYSE:TRI). This group of stocks’ market values are closest to OXY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALL 37 1712738 -11
STZ 52 1980100 6
TEF 9 36499 4
TRI 21 343733 0
Average 29.75 1018268 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.75 hedge funds with bullish positions and the average amount invested in these stocks was $1018 million. That figure was $2306 million in OXY’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 9 bullish hedge fund positions. Occidental Petroleum Corporation (NYSE:OXY) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately OXY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OXY were disappointed as the stock returned -70.5% during the same time period 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 many of these stocks already outperformed the market so far this year.

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