Were Hedge Funds Right About Souring On LyondellBasell Industries NV (LYB)?

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 15 S&P 500 stocks among hedge funds at the end of December 2018 yielded an average return of 19.7% year-to-date, vs. a gain of 13.1% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of LyondellBasell Industries NV (NYSE:LYB).

Is LyondellBasell Industries NV (NYSE:LYB) ready to rally soon? The smart money is getting less optimistic. The number of long hedge fund positions dropped by 2 in recent months. Our calculations also showed that LYB isn’t among the 30 most popular stocks among hedge funds. LYB was in 37 hedge funds’ portfolios at the end of December. There were 39 hedge funds in our database with LYB positions at the end of the previous quarter.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Cruiser Capital Advisors' Returns, AUM and Holdings

We’re going to view the key hedge fund action encompassing LyondellBasell Industries NV (NYSE:LYB).

How are hedge funds trading LyondellBasell Industries NV (NYSE:LYB)?

At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the second quarter of 2018. By comparison, 36 hedge funds held shares or bullish call options in LYB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


The largest stake in LyondellBasell Industries NV (NYSE:LYB) was held by AQR Capital Management, which reported holding $445.6 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $183.4 million position. Other investors bullish on the company included Two Sigma Advisors, Renaissance Technologies, and D E Shaw.

Because LyondellBasell Industries NV (NYSE:LYB) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few funds that elected to cut their entire stakes in the third quarter. At the top of the heap, Zach Schreiber’s Point State Capital cut the largest stake of all the hedgies followed by Insider Monkey, totaling about $258.3 million in stock. Kevin Michael Ulrich and Anthony Davis’s fund, Anchorage Advisors, also cut its stock, about $70.4 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks similar to LyondellBasell Industries NV (NYSE:LYB). We will take a look at Koninklijke Philips NV (NYSE:PHG), Valero Energy Corporation (NYSE:VLO), HP Inc. (NYSE:HPQ), and Analog Devices, Inc. (NASDAQ:ADI). All of these stocks’ market caps are closest to LYB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PHG 14 218249 -1
VLO 32 1347982 -2
HPQ 40 1072149 5
ADI 23 2348869 -5
Average 27.25 1246812 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $1247 million. That figure was $1268 million in LYB’s case. HP Inc. (NYSE:HPQ) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 14 bullish hedge fund positions. LyondellBasell Industries NV (NYSE:LYB) 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 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 LYB wasn’t in this group. Hedge funds that bet on LYB were disappointed as the stock returned 5.9% 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.