It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. 5.6% gain for SPY), with 53% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Pioneer Natural Resources Company (NYSE:PXD).
Is Pioneer Natural Resources Company (NYSE:PXD) a healthy stock for your portfolio? Hedge funds are in an optimistic mood. The number of bullish hedge fund positions improved by 1 recently. Our calculations also showed that PXD isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to the beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the recent hedge fund action encompassing Pioneer Natural Resources Company (NYSE:PXD).
How are hedge funds trading Pioneer Natural Resources Company (NYSE:PXD)?
At the end of the third quarter, a total of 58 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the previous quarter. On the other hand, there were a total of 45 hedge funds with a bullish position in PXD at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Pioneer Natural Resources Company (NYSE:PXD) was held by Baupost Group, which reported holding $696.8 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $263.9 million position. Other investors bullish on the company included Adage Capital Management, Millennium Management, and Two Sigma Advisors.
Consequently, key money managers have jumped into Pioneer Natural Resources Company (NYSE:PXD) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable call position in Pioneer Natural Resources Company (NYSE:PXD). Point72 Asset Management had $52.3 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also initiated a $15.9 million position during the quarter. The other funds with brand new PXD positions are Jeffrey Talpins’s Element Capital Management, Bruce Kovner’s Caxton Associates LP, and Benjamin A. Smith’s Laurion Capital Management.
Let’s go over hedge fund activity in other stocks similar to Pioneer Natural Resources Company (NYSE:PXD). These stocks are NXP Semiconductors NV (NASDAQ:NXPI), Fortive Corporation (NYSE:FTV), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), and BT Group plc (NYSE:BT). This group of stocks’ market values match PXD’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NXPI | 78 | 7253547 | -15 |
| FTV | 35 | 3697551 | 8 |
| ERIC | 13 | 144993 | 3 |
| BT | 6 | 4458 | 0 |
| Average | 33 | 2775 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $2.78 billion. That figure was $2.27 billion in PXD’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand BT Group plc (NYSE:BT) is the least popular one with only 6 bullish hedge fund positions. Pioneer Natural Resources Company (NYSE:PXD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NXPI might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
