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Were Hedge Funds Right About Souring On Chevron Corporation (CVX)?

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 750 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 Chevron Corporation (NYSE:CVX).

Is Chevron Corporation (NYSE:CVX) worth your attention right now? Money managers are getting less bullish. The number of bullish hedge fund bets were trimmed by 9 recently. Our calculations also showed that CVX isn’t among the 30 most popular stocks among hedge funds.

5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are viewed as worthless, old investment vehicles of the past. While there are more than 8000 funds in operation at present, Our researchers choose to focus on the crème de la crème of this group, about 750 funds. It is estimated that this group of investors command most of all hedge funds’ total asset base, and by tailing their inimitable picks, Insider Monkey has revealed many investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s flagship hedge fund strategy beat the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Ken Fisher FISHER ASSET MANAGEMENT

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s view the new hedge fund action encompassing Chevron Corporation (NYSE:CVX).

How have hedgies been trading Chevron Corporation (NYSE:CVX)?

At Q2’s end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CVX over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CVX Positions

Among these funds, Fisher Asset Management held the most valuable stake in Chevron Corporation (NYSE:CVX), which was worth $627.1 million at the end of the second quarter. On the second spot was Adage Capital Management which amassed $279.1 million worth of shares. Moreover, Two Sigma Advisors, Citadel Investment Group, and Diamond Hill Capital were also bullish on Chevron Corporation (NYSE:CVX), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Chevron Corporation (NYSE:CVX) has witnessed falling interest from the smart money, we can see that there exists a select few hedge funds who sold off their entire stakes in the second quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies sold off the largest stake of all the hedgies tracked by Insider Monkey, worth close to $225.5 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dumped about $51.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 9 funds in the second quarter.

Let’s check out hedge fund activity in other stocks similar to Chevron Corporation (NYSE:CVX). These stocks are UnitedHealth Group Incorporated (NYSE:UNH), The Home Depot, Inc. (NYSE:HD), The Coca-Cola Company (NYSE:KO), and Merck & Co., Inc. (NYSE:MRK). This group of stocks’ market values match CVX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNH 68 6312340 -4
HD 53 3714136 -5
KO 48 22584402 0
MRK 70 4860053 6
Average 59.75 9367733 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 59.75 hedge funds with bullish positions and the average amount invested in these stocks was $9368 million. That figure was $1689 million in CVX’s case. Merck & Co., Inc. (NYSE:MRK) is the most popular stock in this table. On the other hand The Coca-Cola Company (NYSE:KO) is the least popular one with only 48 bullish hedge fund positions. Compared to these stocks Chevron Corporation (NYSE:CVX) is even less popular than KO. Hedge funds dodged a bullet by taking a bearish stance towards CVX. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CVX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CVX investors were disappointed as the stock returned -3.7% during the third quarter 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 in 2019.

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

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