After having been range-bound for more than three months, crude futures have recently shown substantial volatility, having fallen below the pivotal $50 per barrel mark. While bears worry that shale is just too cost competitive, many bulls latch on to the belief that Saudi Arabia has strong incentive to ensure steady and relatively robust oil prices for the upcoming Saudi Aramco IPO in 2017. In addition, strong domestic economic growth along with the Trump administration’s less emphasis on fuel efficient vehicles could help boost crude demand beyond current estimates.
Given that hedge funds have done a lot of research in the sector and count Wall Street’s best and brightest as employees, let’s take a look at some of the smart money’s favorite names in the oil patch, Anadarko Petroleum Corporation (NYSE:APC), Halliburton Company (NYSE:HAL), Pioneer Natural Resources (NYSE:PXD), Marathon Petroleum Corp (NYSE:MPC), and Exxon Mobil Corporation (NYSE:XOM) according to fourth quarter 13F filings.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).
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#5 Exxon Mobil Corporation (NYSE:XOM)
– Number of Hedge Fund Holders (as of December 31): 60
– Total Value of Hedge Fund Holdings (as of December 31): $2.88 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 0.80%
Of the 742 elite funds we track, 60 funds owned $2.88 billion of Exxon Mobil Corporation (NYSE:XOM) and accounted for 0.80% of the float on December 31, up from 59 funds and $2.83 billion respectively on September 30. After having trended lower due to a disappointing earnings report, Exxon has found a near-term bottom at around the $80 per share mark. Although Exxon still isn’t cheap, its dividend of around 3.66% at current prices is as safe as it gets in the oil patch. Many bulls hope that Exxon will eventually do business again in Russia, a country with substantial oil reserves. If that happens, Exxon would look cheaper based on price-to-reserves and its stock could receive a lift.
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#4 Marathon Petroleum Corp (NYSE:MPC)
– Number of Hedge Fund Holders (as of December 31): 60
– Total Value of Hedge Fund Holdings (as of December 31): $3.65 billion
– Hedge Fund Holdings as Percent of Float (as of December 31): 13.70%
If oil prices drop, refiners such as Marathon Petroleum Corp (NYSE:MPC) could benefit due to cheaper input costs. In addition, potentially less regulation in the industry and a less powerful EPA could boost margins. Given all the positives, it’s not surprising that Marathon Petroleum has rallied strongly from early November and that 60 top funds reported owning shares of the company at the end of Q4, up from 53 at the end of Q3.
