Hedge Funds Are Cashing Out Of Devon Energy Corporation (DVN)

In this article we will take a look at whether hedge funds think Devon Energy Corporation (NYSE:DVN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Devon Energy Corporation (NYSE:DVN) a buy here? The smart money was getting less optimistic. The number of long hedge fund positions dropped by 2 recently. Devon Energy Corporation (NYSE:DVN) was in 50 hedge funds’ portfolios at the end of June. The all time high for this statistic is 61. Our calculations also showed that DVN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

Leon Cooperman of Omega Advisors

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 EV 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. With all of this in mind we’re going to view the recent hedge fund action regarding Devon Energy Corporation (NYSE:DVN).

Do Hedge Funds Think DVN Is A Good Stock To Buy Now?

At the end of June, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. On the other hand, there were a total of 45 hedge funds with a bullish position in DVN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in Devon Energy Corporation (NYSE:DVN) was held by Adage Capital Management, which reported holding $219 million worth of stock at the end of June. It was followed by Permian Investment Partners with a $184.7 million position. Other investors bullish on the company included Fisher Asset Management, Omega Advisors, and Impala Asset Management. In terms of the portfolio weights assigned to each position Permian Investment Partners allocated the biggest weight to Devon Energy Corporation (NYSE:DVN), around 19.12% of its 13F portfolio. Alden Global Capital is also relatively very bullish on the stock, dishing out 17.74 percent of its 13F equity portfolio to DVN.

Seeing as Devon Energy Corporation (NYSE:DVN) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few money managers who were dropping their positions entirely in the second quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $119.2 million in stock, and Zach Schreiber’s Point State Capital was right behind this move, as the fund sold off about $109.6 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Devon Energy Corporation (NYSE:DVN) but similarly valued. These stocks are Albemarle Corporation (NYSE:ALB), Tradeweb Markets Inc. (NASDAQ:TW), Qualtrics International Inc. (NASDAQ:XM), Ubiquiti Inc. (NYSE:UI), Citizens Financial Group Inc (NYSE:CFG), Restaurant Brands International Inc (NYSE:QSR), and The Cooper Companies, Inc. (NYSE:COO). All of these stocks’ market caps are closest to DVN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.7 hedge funds with bullish positions and the average amount invested in these stocks was $944 million. That figure was $1039 million in DVN’s case. Qualtrics International Inc. (NASDAQ:XM) is the most popular stock in this table. On the other hand Tradeweb Markets Inc. (NASDAQ:TW) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Devon Energy Corporation (NYSE:DVN) is more popular among hedge funds. Our overall hedge fund sentiment score for DVN is 77.6. 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. 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 returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on DVN as the stock returned 28.3% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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Disclosure: None. This article was originally published at Insider Monkey.