Do Hedge Funds Love ConocoPhillips (COP)?

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at ConocoPhillips (NYSE:COP) from the perspective of those successful funds.

ConocoPhillips (NYSE:COP) investors should pay attention to a decrease in support from the world’s most successful money managers recently. COP was in 40 hedge funds’ portfolios at the end of September. There were 43 hedge funds in our database with COP positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Statoil ASA (ADR) (NYSE:STO), EOG Resources Inc (NYSE:EOG), and Eni SpA (ADR) (NYSE:E) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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With all of this in mind, let’s take a look at the recent action encompassing ConocoPhillips (NYSE:COP).

Hedge fund activity in ConocoPhillips (NYSE:COP)

At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by 7% from the second quarter of 2016. On the other hand, there were a total of 31 hedge funds with a bullish position in COP at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Donald Yacktman’s Yacktman Asset Management has the largest position in ConocoPhillips (NYSE:COP), worth close to $187.1 million, comprising 1.6% of its total 13F portfolio. The second most bullish fund is D E Shaw, holding a $135.6 million position. Remaining hedge funds and institutional investors with similar optimism comprise Steve Cohen’s Point72 Asset Management, Richard S. Pzena’s Pzena Investment Management and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that got rid of their entire stakes in the stock during the third quarter. At the top of the heap, Jean-Marie Eveillard’s First Eagle Investment Management got rid of the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at close to $363.8 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $30.5 million worth of call options.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ConocoPhillips (NYSE:COP) but similarly valued. We will take a look at Statoil ASA (ADR) (NYSE:STO), EOG Resources Inc (NYSE:EOG), Eni SpA (ADR) (NYSE:E), and Honda Motor Co Ltd (ADR) (NYSE:HMC). All of these stocks’ market caps are closest to COP’s market cap.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $1.33 billion in COP’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand Eni SpA (ADR) (NYSE:E) is the least popular one with only 4 bullish hedge fund positions. ConocoPhillips (NYSE:COP) 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. In this regard EOG might be a better candidate to consider taking a long position in.

Disclosure: None