Where Do Hedge Funds Stand On Cenovus Energy Inc (CVE)?

In this article you are going to find out whether hedge funds think Cenovus Energy Inc (NYSE:CVE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Hedge fund interest in Cenovus Energy Inc (NYSE:CVE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that CVE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare CVE to other stocks including VICI Properties Inc. (NYSE:VICI), GDS Holdings Limited (NASDAQ:GDS), and Entegris Inc (NASDAQ:ENTG) to get a better sense of its popularity.

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 115 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.

Scott Bessent of Key Square Capital Management

Scott Bessent of Key Square Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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 view the key hedge fund action encompassing Cenovus Energy Inc (NYSE:CVE).

Do Hedge Funds Think CVE Is A Good Stock To Buy Now?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in CVE over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Pzena Investment Management was the largest shareholder of Cenovus Energy Inc (NYSE:CVE), with a stake worth $123.3 million reported as of the end of March. Trailing Pzena Investment Management was Arrowstreet Capital, which amassed a stake valued at $55.5 million. Encompass Capital Advisors, Point72 Asset Management, and Waratah Capital Advisors 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 Encompass Capital Advisors allocated the biggest weight to Cenovus Energy Inc (NYSE:CVE), around 3.23% of its 13F portfolio. NewGen Asset Management is also relatively very bullish on the stock, setting aside 1.86 percent of its 13F equity portfolio to CVE.

Because Cenovus Energy Inc (NYSE:CVE) has experienced declining sentiment from the smart money, it’s easy to see that there was a specific group of money managers who sold off their entire stakes by the end of the first quarter. Intriguingly, Len Kipp and Xavier Majic’s Maple Rock Capital dropped the largest position of all the hedgies tracked by Insider Monkey, totaling about $12.7 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also dropped its stock, about $4.5 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Cenovus Energy Inc (NYSE:CVE). We will take a look at VICI Properties Inc. (NYSE:VICI), GDS Holdings Limited (NASDAQ:GDS), Entegris Inc (NASDAQ:ENTG), Eastman Chemical Company (NYSE:EMN), Franklin Resources, Inc. (NYSE:BEN), Westinghouse Air Brake Technologies Corporation (NYSE:WAB), and China Southern Airlines Co Ltd (NYSE:ZNH). This group of stocks’ market caps are similar to CVE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VICI 41 875487 3
GDS 40 2080333 1
ENTG 23 1484733 -7
EMN 27 162100 -4
BEN 31 198221 -2
WAB 40 2481343 -5
ZNH 3 15588 0
Average 29.3 1042544 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $1043 million. That figure was $380 million in CVE’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 bullish hedge fund positions. Cenovus Energy Inc (NYSE:CVE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CVE is 53.6. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately CVE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CVE investors were disappointed as the stock returned 7.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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