Is Royal Dutch Shell plc (NYSE:RDS) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Royal Dutch Shell plc (NYSE:RDS) a buy right now? The best stock pickers were buying. The number of bullish hedge fund positions inched up by 2 lately. Royal Dutch Shell plc (NYSE:RDS) was in 36 hedge funds’ portfolios at the end of March. The all time high for this statistic is 39. Our calculations also showed that RDS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 34 hedge funds in our database with RDS holdings at the end of December.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Zilvinas Mecelis of Covalis Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s go over the fresh hedge fund action encompassing Royal Dutch Shell plc (NYSE:RDS).
Do Hedge Funds Think RDS Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RDS over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Royal Dutch Shell plc (NYSE:RDS), with a stake worth $658 million reported as of the end of March. Trailing Fisher Asset Management was Arrowstreet Capital, which amassed a stake valued at $278.4 million. Arrowstreet Capital, Pzena Investment Management, and Millennium Management 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 Stamos Capital allocated the biggest weight to Royal Dutch Shell plc (NYSE:RDS), around 3.02% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 2.69 percent of its 13F equity portfolio to RDS.
Consequently, key hedge funds were leading the bulls’ herd. Renaissance Technologies, created the most outsized position in Royal Dutch Shell plc (NYSE:RDS). Renaissance Technologies had $45 million invested in the company at the end of the quarter. Renaissance Technologies also made a $36.6 million investment in the stock during the quarter. The other funds with brand new RDS positions are Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Zilvinas Mecelis’s Covalis Capital, and David Tepper’s Appaloosa Management LP.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Royal Dutch Shell plc (NYSE:RDS) but similarly valued. We will take a look at Honeywell International Inc. (NASDAQ:HON), QUALCOMM, Incorporated (NASDAQ:QCOM), The Boeing Company (NYSE:BA), NextEra Energy, Inc. (NYSE:NEE), United Parcel Service, Inc. (NYSE:UPS), Union Pacific Corporation (NYSE:UNP), and Unilever PLC (NYSE:UL). This group of stocks’ market values resemble RDS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HON | 56 | 1731346 | 11 |
| QCOM | 73 | 2765985 | -12 |
| BA | 59 | 1437584 | 4 |
| NEE | 63 | 2725995 | 2 |
| UPS | 44 | 1346598 | -4 |
| UNP | 75 | 4685045 | 7 |
| UL | 20 | 826829 | -5 |
| Average | 55.7 | 2217055 | 0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 55.7 hedge funds with bullish positions and the average amount invested in these stocks was $2217 million. That figure was $2190 million in RDS’s case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand Unilever PLC (NYSE:UL) is the least popular one with only 20 bullish hedge fund positions. Royal Dutch Shell plc (NYSE:RDS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RDS is 49.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately RDS wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RDS investors were disappointed as the stock returned 6.8% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.
