Do Hedge Funds Love Cenovus Energy Inc (USA) (CVE)?

Is Cenovus Energy Inc (USA) (NYSE:CVE) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They fail miserably sometimes, but historically their consensus stock picks outperformed the market after adjusting for known risk factors.

Is Cenovus Energy Inc (USA) (NYSE:CVE) a healthy stock for your portfolio? Investors who are in the know are becoming less confident. The number of long hedge fund bets were cut by 4 in recent months. At the end of this article we will also compare CVE to other stocks, including Citizens Financial Group Inc (NYSE:CFG), Genuine Parts Company (NYSE:GPC), and Verisk Analytics, Inc. (NASDAQ:VRSK) to get a better sense of its popularity.

In the eyes of most stock holders, hedge funds are seen as underperforming, outdated financial tools of yesteryear. While there are more than an 8000 funds in operation at present, We hone in on the masters of this club, approximately 700 funds. These investment experts administer the lion’s share of the hedge fund industry’s total capital, and by monitoring their finest picks, Insider Monkey has spotted several investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to take a look at the latest action surrounding Cenovus Energy Inc (USA) (NYSE:CVE).

Hedge fund activity in Cenovus Energy Inc (USA) (NYSE:CVE)

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 20% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Doug Silverman and Alexander Klabin’s Senator Investment Group has the largest position in Cenovus Energy Inc (USA) (NYSE:CVE), worth close to $91 million, amounting to 1.1% of its total 13F portfolio. On Senator Investment Group’s heels is Richard S. Pzena of Pzena Investment Management, with a $59.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise Anand Parekh’s Alyeska Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Israel Englander’s Millennium Management.

Judging by the fact that Cenovus Energy Inc (USA) (NYSE:CVE) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds who sold off their full holdings in the third quarter. It’s worth mentioning that Jonathon Jacobson’s Highfields Capital Management cut the largest investment of the 700 funds followed by Insider Monkey, worth an estimated $70 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund cut about $18.6 million worth of CVE shares. These transactions are interesting, as aggregate hedge fund interest dropped by 4 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cenovus Energy Inc (USA) (NYSE:CVE) but similarly valued. These stocks are Citizens Financial Group Inc (NYSE:CFG), Genuine Parts Company (NYSE:GPC), Verisk Analytics, Inc. (NASDAQ:VRSK), and Enersis S.A. (ADR) (NYSE:ENI). This group of stocks’ market caps are closest to CVE’s market cap.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $693 million. That figure was $725 million in CVE’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table, whereas Enersis S.A. (ADR) (NYSE:ENI) is the laggard with only 13 bullish hedge fund positions. Cenovus Energy Inc (USA) (NYSE:CVE) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CFG might be a better candidate to consider a long position.