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 have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Valero Energy Corporation (NYSE:VLO) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Valero Energy Corporation (NYSE:VLO) undervalued? Hedge funds were buying. The number of bullish hedge fund bets advanced by 3 recently. Valero Energy Corporation (NYSE:VLO) was in 41 hedge funds’ portfolios at the end of March. The all time high for this statistic is 56. Our calculations also showed that VLO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Zilvinas Mecelis of Covalis Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action encompassing Valero Energy Corporation (NYSE:VLO).
Do Hedge Funds Think VLO Is A Good Stock To Buy Now?
At first quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 45 hedge funds with a bullish position in VLO a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
More specifically, Elliott Investment Management was the largest shareholder of Valero Energy Corporation (NYSE:VLO), with a stake worth $71.6 million reported as of the end of March. Trailing Elliott Investment Management was Citadel Investment Group, which amassed a stake valued at $68.6 million. Citadel Investment Group, Holocene Advisors, and SIR Capital 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 SIR Capital Management allocated the biggest weight to Valero Energy Corporation (NYSE:VLO), around 7.11% of its 13F portfolio. Covalis Capital is also relatively very bullish on the stock, earmarking 3.63 percent of its 13F equity portfolio to VLO.
Now, some big names were leading the bulls’ herd. Elliott Investment Management, managed by Paul Singer, assembled the biggest call position in Valero Energy Corporation (NYSE:VLO). Elliott Investment Management had $71.6 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan’s SIR Capital Management also initiated a $42.2 million position during the quarter. The other funds with brand new VLO positions are Dmitry Balyasny’s Balyasny Asset Management, Benjamin A. Smith’s Laurion Capital Management, and Zilvinas Mecelis’s Covalis Capital.
Let’s check out hedge fund activity in other stocks similar to Valero Energy Corporation (NYSE:VLO). These stocks are Liberty Broadband Corp (NASDAQ:LBRDA), Liberty Broadband Corp (NASDAQ:LBRDK), Discover Financial Services (NYSE:DFS), First Republic Bank (NYSE:FRC), ViacomCBS Inc. (NASDAQ:VIAC), Okta, Inc. (NASDAQ:OKTA), and Fastenal Company (NASDAQ:FAST). This group of stocks’ market valuations are similar to VLO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LBRDA | 23 | 774868 | -3 |
| LBRDK | 70 | 6857308 | -10 |
| DFS | 45 | 654294 | 2 |
| FRC | 41 | 1262066 | 7 |
| VIAC | 89 | 2349597 | 45 |
| OKTA | 48 | 1616565 | -13 |
| FAST | 24 | 576286 | -6 |
| Average | 48.6 | 2012998 | 3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.6 hedge funds with bullish positions and the average amount invested in these stocks was $2013 million. That figure was $463 million in VLO’s case. ViacomCBS Inc. (NASDAQ:VIAC) is the most popular stock in this table. On the other hand Liberty Broadband Corp (NASDAQ:LBRDA) is the least popular one with only 23 bullish hedge fund positions. Valero Energy Corporation (NYSE:VLO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VLO is 43.6. 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 gained 17.4% in 2021 through June 18th and beat the market by 6.1 percentage points. A small number of hedge funds were also right about betting on VLO, though not to the same extent, as the stock returned 7.5% since the end of Q1 (through June 18th) and outperformed the market.
Follow Valero Energy Corp (NYSE:VLO)
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Disclosure: None. This article was originally published at Insider Monkey.
