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Were Hedge Funds Right About Selling TOTAL S.A. (TOT)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 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’ recent losses in Facebook. Let’s take a closer look at what the funds we track think about TOTAL S.A. (NYSE:TOT) in this article.

Is TOTAL S.A. (NYSE:TOT) an attractive investment right now? Prominent investors are getting less bullish. The number of bullish hedge fund positions were cut by 4 in recent months. Our calculations also showed that TOT isn’t among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

FISHER ASSET MANAGEMENT

We’re going to view the new hedge fund action regarding TOTAL S.A. (NYSE:TOT).

How have hedgies been trading TOTAL S.A. (NYSE:TOT)?

At Q4’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in TOT a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

TOT_mar2019

More specifically, Fisher Asset Management was the largest shareholder of TOTAL S.A. (NYSE:TOT), with a stake worth $881.4 million reported as of the end of September. Trailing Fisher Asset Management was Point72 Asset Management, which amassed a stake valued at $24 million. Citadel Investment Group, Ionic Capital Management, and Adage Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as TOTAL S.A. (NYSE:TOT) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, Jeffrey Talpins’s Element Capital Management cut the biggest investment of all the hedgies tracked by Insider Monkey, worth about $0.4 million in stock, and Thomas Bailard’s Bailard Inc was right behind this move, as the fund said goodbye to about $0.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as TOTAL S.A. (NYSE:TOT) but similarly valued. We will take a look at Anheuser-Busch InBev SA/NV (NYSE:BUD), BP plc (NYSE:BP), Citigroup Inc. (NYSE:C), and Abbott Laboratories (NYSE:ABT). This group of stocks’ market caps are similar to TOT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BUD 21 1133052 1
BP 34 1377098 2
C 90 8700435 -7
ABT 51 1634329 -2
Average 49 3211229 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 49 hedge funds with bullish positions and the average amount invested in these stocks was $3211 million. That figure was $914 million in TOT’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Anheuser-Busch InBev SA/NV (NYSE:BUD) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks TOTAL S.A. (NYSE:TOT) is even less popular than BUD. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately TOT wasn’t in this group. The small number of hedge funds that bet on TOT were disappointed as the stock returned 12.2% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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