Did The Smart Money Get Devon Energy Corporation (DVN) Right?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Devon Energy Corporation (NYSE:DVN) based on that data and determine whether they were really smart about the stock.

Is Devon Energy Corporation (NYSE:DVN) an excellent investment right now? Money managers were taking a bearish view. The number of long hedge fund positions fell by 2 lately. Devon Energy Corporation (NYSE:DVN) was in 48 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 61. Our calculations also showed that DVN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 50 hedge funds in our database with DVN positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we’re going to take a peek at the recent hedge fund action surrounding Devon Energy Corporation (NYSE:DVN).

Scott Bessent of Key Square Capital Management

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

At the end of the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DVN over the last 25 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, GQG Partners, managed by Rajiv Jain, holds the largest position in Devon Energy Corporation (NYSE:DVN). GQG Partners has a $494 million position in the stock, comprising 1.4% of its 13F portfolio. Sitting at the No. 2 spot is Alex Duran and Scott Hendrickson of Permian Investment Partners, with a $220.1 million position; 21.9% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass Ken Fisher’s Fisher Asset Management, Leon Cooperman’s Omega Advisors and Robert Bishop’s Impala Asset Management. In terms of the portfolio weights assigned to each position Permian Investment Partners allocated the biggest weight to Devon Energy Corporation (NYSE:DVN), around 21.85% of its 13F portfolio. Key Square Capital Management is also relatively very bullish on the stock, earmarking 7.27 percent of its 13F equity portfolio to DVN.

Due to the fact that Devon Energy Corporation (NYSE:DVN) has experienced falling interest from the smart money, logic holds that there exists a select few fund managers that slashed their entire stakes last quarter. It’s worth mentioning that Todd J. Kantor’s Encompass Capital Advisors said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, totaling an estimated $41.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund sold off about $13.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Devon Energy Corporation (NYSE:DVN) but similarly valued. We will take a look at ZoomInfo Technologies Inc. (NASDAQ:ZI), Caesars Entertainment Inc. (NASDAQ:CZR), Credit Suisse Group AG (NYSE:CS), Rogers Communications Inc. (NYSE:RCI), Splunk Inc (NASDAQ:SPLK), Tractor Supply Company (NASDAQ:TSCO), and Fox Corporation (NASDAQ:FOXA). This group of stocks’ market values are closest to DVN’s market value.

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As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $1053 million. That figure was $1401 million in DVN’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 8 bullish hedge fund positions. Devon Energy Corporation (NYSE:DVN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for DVN is 62.3. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on DVN as the stock returned 45.1% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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