Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With this in mind let’s see whether PetroChina Company Limited (NYSE:PTR) makes for a good investment at the moment. We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Hedge fund interest in PetroChina Company Limited (NYSE:PTR) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare PTR to other stocks including salesforce.com, inc. (NYSE:CRM), NVIDIA Corporation (NASDAQ:NVDA), and Amgen, Inc. (NASDAQ:AMGN) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to analyze the latest hedge fund action encompassing PetroChina Company Limited (NYSE:PTR).
What does smart money think about PetroChina Company Limited (NYSE:PTR)?
At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PTR over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in PetroChina Company Limited (NYSE:PTR), which was worth $60.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $16.3 million worth of shares. Millennium Management, Marshall Wace LLP, and Two Sigma Advisors 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 Athos Capital allocated the biggest weight to PetroChina Company Limited (NYSE:PTR), around 0.42% of its 13F portfolio. Stamos Capital is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to PTR.
Since PetroChina Company Limited (NYSE:PTR) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies who were dropping their entire stakes by the end of the third quarter. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management dropped the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $2.3 million in call options. Ken Griffin’s fund, Citadel Investment Group, also cut its call options, about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as PetroChina Company Limited (NYSE:PTR) but similarly valued. We will take a look at salesforce.com, inc. (NYSE:CRM), NVIDIA Corporation (NASDAQ:NVDA), Amgen, Inc. (NASDAQ:AMGN), and TOTAL S.A. (NYSE:TOT). This group of stocks’ market values are similar to PTR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRM | 112 | 9798571 | 3 |
| NVDA | 79 | 3179400 | 23 |
| AMGN | 58 | 2290267 | 3 |
| TOT | 17 | 1195776 | -1 |
| Average | 66.5 | 4116004 | 7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 66.5 hedge funds with bullish positions and the average amount invested in these stocks was $4116 million. That figure was $94 million in PTR’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks PetroChina Company Limited (NYSE:PTR) is even less popular than TOT. Hedge funds dodged a bullet by taking a bearish stance towards PTR. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately PTR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PTR investors were disappointed as the stock returned -31.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
