Was The Smart Money Right About Pioneer Natural Resources Company (PXD)?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Pioneer Natural Resources Company (NYSE:PXD) based on those filings.

Is Pioneer Natural Resources Company (NYSE:PXD) a buy right now? Hedge funds were getting less bullish. The number of long hedge fund positions shrunk by 2 recently. Pioneer Natural Resources Company (NYSE:PXD) was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings). There were 42 hedge funds in our database with PXD holdings at the end of September.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. Keeping this in mind let’s take a look 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?

Heading into the first quarter of 2021, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the third quarter of 2020. On the other hand, there were a total of 53 hedge funds with a bullish position in PXD a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

The largest stake in Pioneer Natural Resources Company (NYSE:PXD) was held by Adage Capital Management, which reported holding $131.1 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $107.5 million position. Other investors bullish on the company included Millennium Management, Point State Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Point State Capital allocated the biggest weight to Pioneer Natural Resources Company (NYSE:PXD), around 1.85% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, setting aside 1.69 percent of its 13F equity portfolio to PXD.

Since Pioneer Natural Resources Company (NYSE:PXD) has experienced a decline in interest from the smart money, it’s safe to say that there lies a certain “tier” of fund managers that elected to cut their full holdings heading into Q1. At the top of the heap, Brandon Haley’s Holocene Advisors cut the largest position of all the hedgies tracked by Insider Monkey, worth about $27.1 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $18.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q1.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Pioneer Natural Resources Company (NYSE:PXD) but similarly valued. These stocks are Hologic, Inc. (NASDAQ:HOLX), PagSeguro Digital Ltd. (NYSE:PAGS), Check Point Software Technologies Ltd. (NASDAQ:CHKP), SS&C Technologies Holdings, Inc. (NASDAQ:SSNC), Restaurant Brands International Inc (NYSE:QSR), Smith & Nephew plc (NYSE:SNN), and Amcor plc (NYSE:AMCR). This group of stocks’ market values are closest to PXD’s market value.

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As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $1241 million. That figure was $686 million in PXD’s case. SS&C Technologies Holdings, Inc. (NASDAQ:SSNC) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 12 bullish hedge fund positions. Pioneer Natural Resources Company (NYSE:PXD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PXD is 57.1. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on PXD as the stock returned 35.5% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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