The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded BP plc (NYSE:BP) and determine whether the smart money was really smart about this stock.
BP plc (NYSE:BP) investors should be aware of a decrease in hedge fund interest in recent months. BP plc (NYSE:BP) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistics is 40. Our calculations also showed that BP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jeffrey Ubben of ValueAct Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a glance at the fresh hedge fund action encompassing BP plc (NYSE:BP).
How are hedge funds trading BP plc (NYSE:BP)?
At the end of June, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in BP a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the most valuable position in BP plc (NYSE:BP), worth close to $232.6 million, amounting to 0.2% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, with a $193.7 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, William B. Gray’s Orbis Investment Management and Jeffrey Ubben’s ValueAct Capital. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to BP plc (NYSE:BP), around 7.52% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, designating 2.14 percent of its 13F equity portfolio to BP.
Because BP plc (NYSE:BP) has faced a decline in interest from the aggregate hedge fund industry, we can see that there was a specific group of funds that slashed their positions entirely heading into Q3. At the top of the heap, Steve Cohen’s Point72 Asset Management sold off the largest position of the 750 funds followed by Insider Monkey, worth close to $14.6 million in stock. John Brennan’s fund, Sirios Capital Management, also dumped its stock, about $9.1 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 4 funds heading into Q3.
Let’s now review hedge fund activity in other stocks similar to BP plc (NYSE:BP). These stocks are Diageo plc (NYSE:DEO), Intuit Inc. (NASDAQ:INTU), ServiceNow Inc (NYSE:NOW), American Express Company (NYSE:AXP), Morgan Stanley (NYSE:MS), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), and Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF). All of these stocks’ market caps are closest to BP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DEO | 20 | 653839 | 3 |
| INTU | 53 | 1735265 | -1 |
| NOW | 86 | 4949673 | 1 |
| AXP | 54 | 17635296 | -3 |
| MS | 61 | 4357171 | -9 |
| VRTX | 54 | 3477688 | -2 |
| KOF | 5 | 358015 | -2 |
| Average | 47.6 | 4738135 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.6 hedge funds with bullish positions and the average amount invested in these stocks was $4738 million. That figure was $737 million in BP’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) is the least popular one with only 5 bullish hedge fund positions. BP plc (NYSE:BP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BP is 34.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately BP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BP investors were disappointed as the stock returned -22.4% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
