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Were Hedge Funds Right About Exxon Mobil Corporation (XOM)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Exxon Mobil Corporation (NYSE:XOM).

Is Exxon Mobil Corporation (NYSE:XOM) a bargain? The best stock pickers are buying. The number of long hedge fund bets went up by 8 lately. Our calculations also showed that XOM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). XOM was in 63 hedge funds’ portfolios at the end of December. There were 55 hedge funds in our database with XOM positions at the end of the previous quarter.

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 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.

Phill Gross of Adage Capital Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Blockchain technology is about to go mainstream and reach heavy adoption, so we check out this tech investor’s blockchain stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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. Keeping this in mind let’s take a glance at the recent hedge fund action surrounding Exxon Mobil Corporation (NYSE:XOM).

What have hedge funds been doing with Exxon Mobil Corporation (NYSE:XOM)?

Heading into the first quarter of 2020, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards XOM over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Exxon Mobil Corporation (NYSE:XOM), which was worth $455.1 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $216.7 million worth of shares. Adage Capital Management, Renaissance Technologies, and Citadel Investment Group 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 Kamunting Street Capital allocated the biggest weight to Exxon Mobil Corporation (NYSE:XOM), around 8.53% of its 13F portfolio. Lucas Capital Management is also relatively very bullish on the stock, designating 2.28 percent of its 13F equity portfolio to XOM.

As aggregate interest increased, key hedge funds were breaking ground themselves. Renaissance Technologies, founded by Jim Simons, assembled the most valuable position in Exxon Mobil Corporation (NYSE:XOM). Renaissance Technologies had $190.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $156.6 million position during the quarter. The other funds with new positions in the stock are Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Donald Sussman’s Paloma Partners, and Matthew Tewksbury’s Stevens Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Exxon Mobil Corporation (NYSE:XOM) but similarly valued. These stocks are AT&T Inc. (NYSE:T), UnitedHealth Group Inc. (NYSE:UNH), The Walt Disney Company (NYSE:DIS), and Intel Corporation (NASDAQ:INTC). All of these stocks’ market caps match XOM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
T 50 1406918 -1
UNH 91 7896286 3
DIS 118 4968497 3
INTC 58 6147008 -6
Average 79.25 5104677 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 79.25 hedge funds with bullish positions and the average amount invested in these stocks was $5105 million. That figure was $2028 million in XOM’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 50 bullish hedge fund positions. Exxon Mobil Corporation (NYSE:XOM) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th but beat the market by 11 percentage points. Unfortunately XOM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); XOM investors were disappointed as the stock returned -40.1% 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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