Hedge Funds Are Avoiding Exxon Mobil Corporation (XOM) Like The Plague

Is Exxon Mobil Corporation (NYSE:XOM) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks -despite their recent losses- have historically done very well and have outperformed the market after adjusting for risk.

Exxon Mobil Corporation (NYSE:XOM) has seen a decrease in hedge fund sentiment lately. This is negative news but more importantly hedge funds collectively own only 0.7% of Exxon Mobil’s outstanding shares. When we look at the short interest in the stock -more than 1% of XOM’s outstanding shares-, we can easily see that hedge funds’ overall exposure is negative. At the end of this article we will also compare XOM to other stocks with similar market caps including Facebook Inc (NASDAQ:FB), Johnson & Johnson (NYSE:JNJ), and General Electric Company (NYSE:GE) to get a better sense of its popularity.

Wall Street analysts aren’t bullish on Exxon either. The mean recommendation among analysts is a “Hold”. Several analysts think Exxon is fully priced and there isn’t much upside. Credit Suisse analysts Edward Westlake, Ben Combes, and Chandra Meenaga increased their price target $78 per share and 2017 EPS estimate to $4.25 saying “XOM is well placed to take advantage of the deflation emerging across the industry. That said, unless oil prices surprise our $65/bbl forecast or XOM’s position on a deflating cost curve fall more than expected, the sustainable free cash yields don’t seem attractive.”

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Now, let’s analyze the key action surrounding Exxon Mobil Corporation (NYSE:XOM).

Hedge fund activity in Exxon Mobil Corporation (NYSE:XOM)

At Q1’s end, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the fourth quarter of 2015. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to Insider Monkey’s database, three mutual funds hold the top three positions in XOM. Richard S. Pzena’s Pzena Investment Management has the most valuable position in Exxon Mobil Corporation (NYSE:XOM), worth close to $416.3 million, corresponding to 2.6% of its total 13F portfolio. On Pzena Investment Management’s heels is Fisher Asset Management, led by Ken Fisher, holding a $385.5 million position; 0.7% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions contain Donald Yacktman’s Yacktman Asset Management, Phill Gross and Robert Atchinson’s Adage Capital Management and David Costen Haley’s HBK Investments.

Due to the fact that Exxon Mobil Corporation (NYSE:XOM) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that elected to cut their positions entirely in the fourth quarter. Intriguingly, Bob Peck and Andy Raab’s FPR Partners cut the largest stake of the 700 funds followed by Insider Monkey, totaling about $203.7 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund dropped about $102.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 8 funds in the fourth quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Exxon Mobil Corporation (NYSE:XOM) but similarly valued. These stocks are Facebook Inc (NASDAQ:FB), Johnson & Johnson (NYSE:JNJ), General Electric Company (NYSE:GE), and Amazon.com, Inc. (NASDAQ:AMZN). This group of stocks’ market valuations are closest to XOM’s market valuation.

As you can see these stocks had an average of 109.5 hedge funds with bullish positions and the average amount invested in these stocks was $9991 million. That figure was $2501 million in XOM’s case. Facebook Inc (NASDAQ:FB) is the most popular stock in this table. On the other hand General Electric Company (NYSE:GE) is the least popular one with only 64 bullish hedge fund positions. Compared to these stocks Exxon Mobil Corporation (NYSE:XOM) is even less popular than GE. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, we don’t think it is a good idea to invest in this stock at this point. If you think oil prices are going up, there are better alternatives.