How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Phillips 66 (NYSE:PSX) and determine whether hedge funds had an edge regarding this stock.
Phillips 66 (NYSE:PSX) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 47. PSX investors should be aware of an increase in support from the world’s most elite money managers of late. There were 26 hedge funds in our database with PSX holdings at the end of June. Our calculations also showed that PSX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding Phillips 66 (NYSE:PSX).
David Siegel of Two Sigma Advisors
Do Hedge Funds Think PSX Is A Good Stock To Buy Now?
At third quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in PSX 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.
More specifically, D E Shaw was the largest shareholder of Phillips 66 (NYSE:PSX), with a stake worth $138.8 million reported as of the end of September. Trailing D E Shaw was Millennium Management, which amassed a stake valued at $90.3 million. Citadel Investment Group, Renaissance Technologies, and Citadel Investment Group 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 SIR Capital Management allocated the biggest weight to Phillips 66 (NYSE:PSX), around 2.11% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, designating 2.11 percent of its 13F equity portfolio to PSX.
As industrywide interest jumped, some big names have jumped into Phillips 66 (NYSE:PSX) headfirst. Renaissance Technologies, established the biggest position in Phillips 66 (NYSE:PSX). Renaissance Technologies had $47.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $16.7 million position during the quarter. The following funds were also among the new PSX investors: Paul Tudor Jones’s Tudor Investment Corp, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s also examine hedge fund activity in other stocks similar to Phillips 66 (NYSE:PSX). We will take a look at Liberty Broadband Corp (NASDAQ:LBRDA), Zimmer Biomet Holdings Inc (NYSE:ZBH), Chunghwa Telecom Co., Ltd (NYSE:CHT), Southwest Airlines Co. (NYSE:LUV), XPeng Inc. (NYSE:XPEV), Equity Residential (NYSE:EQR), and Keysight Technologies Inc (NYSE:KEYS). This group of stocks’ market values match PSX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LBRDA | 24 | 885745 | -4 |
| ZBH | 47 | 1664979 | -1 |
| CHT | 6 | 156827 | -1 |
| LUV | 39 | 729508 | -10 |
| XPEV | 25 | 657189 | 6 |
| EQR | 32 | 558805 | 1 |
| KEYS | 30 | 675201 | -2 |
| Average | 29 | 761179 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $761 million. That figure was $409 million in PSX’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 6 bullish hedge fund positions. Phillips 66 (NYSE:PSX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PSX is 65.8. 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 PSX as the stock returned 22.5% 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.
