Hedge Funds Are Souring On Petrobras (PBR)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR).

Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) was in 25 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that PBR isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Ken Heebner of Capital Growth Management

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 review the new hedge fund action regarding Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR).

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

Heading into the third quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PBR over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GQG Partners was the largest shareholder of Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), with a stake worth $1699 million reported as of the end of June. Trailing GQG Partners was Fisher Asset Management, which amassed a stake valued at $564.3 million. Oaktree Capital Management, Contrarian Capital, and Renaissance Technologies 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 Contrarian Capital allocated the biggest weight to Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), around 13.61% of its 13F portfolio. GQG Partners is also relatively very bullish on the stock, setting aside 4.99 percent of its 13F equity portfolio to PBR.

Seeing as Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds who were dropping their entire stakes heading into Q3. At the top of the heap, Richard Oldfield’s Oldfield Partners dumped the biggest stake of the 750 funds followed by Insider Monkey, valued at an estimated $43.2 million in stock, and Alan Howard’s Brevan Howard was right behind this move, as the fund said goodbye to about $29.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q3.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) but similarly valued. We will take a look at FedEx Corporation (NYSE:FDX), The Bank of Nova Scotia (NYSE:BNS), Mercadolibre Inc (NASDAQ:MELI), NetEase, Inc (NASDAQ:NTES), CME Group Inc (NASDAQ:CME), Dell Technologies Inc. (NYSE:DELL), and Duke Energy Corporation (NYSE:DUK). This group of stocks’ market values are closest to PBR’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 50.3 hedge funds with bullish positions and the average amount invested in these stocks was $2708 million. That figure was $2799 million in PBR’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 14 bullish hedge fund positions. Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PBR is 33.6. 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. 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately PBR wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); PBR investors were disappointed as the stock returned -13.8% since the end of June (through 10/22) 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.

Suggested Articles:

• 11 Best Lithium and Battery Stocks To Buy
• 10 Emerging Energy Technologies You Can Invest In Today
• 10 Best Consumer Staples Stocks

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