Hedge Funds Aren’t Crazy About Occidental Petroleum Corporation (OXY) Anymore

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Occidental Petroleum Corporation (NYSE:OXY) has seen a decrease in enthusiasm from smart money lately. At the end of this article we will also compare OXY to other stocks including Enterprise Products Partners L.P. (NYSE:EPD), Duke Energy Corp (NYSE:DUK), and Target Corporation (NYSE:TGT) to get a better sense of its popularity.

To most investors, hedge funds are perceived as underperforming, outdated financial vehicles of years past. While there are greater than 8000 funds in operation at present, We choose to focus on the bigwigs of this club, around 700 funds. It is estimated that this group of investors direct most of the hedge fund industry’s total capital, and by paying attention to their unrivaled equity investments, Insider Monkey has formulated various investment strategies that have historically outstripped the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Now, we’re going to analyze the recent action surrounding Occidental Petroleum Corporation (NYSE:OXY).

What does the smart money think about Occidental Petroleum Corporation (NYSE:OXY)?

Heading into Q4, a total of 44 of the hedge funds tracked by Insider Monkey were bullish on this stock, inching down by 4% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Israel Englander’s Millennium Management has the biggest position in Occidental Petroleum Corporation (NYSE:OXY), worth close to $233.8 million, comprising 0.5% of its total 13F portfolio. The second largest stake is held by Robert Rodriguez and Steven Romick of First Pacific Advisors LLC, with a $223.6 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions encompass John A. Levin’s Levin Capital Strategies, Steve Cohen’s Point72 Asset Management and Charles de Vaulx’s International Value Advisers.

Seeing as Occidental Petroleum Corporation (NYSE:OXY) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes heading into Q4. Interestingly, Daniel S. Och’s OZ Management dropped the biggest position of the 700 funds tracked by Insider Monkey, totaling an estimated $198 million in call options, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $69.4 million worth of call options. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Occidental Petroleum Corporation (NYSE:OXY) but similarly valued. These stocks are Enterprise Products Partners L.P. (NYSE:EPD), Duke Energy Corp (NYSE:DUK), Target Corporation (NYSE:TGT), and BlackRock, Inc. (NYSE:BLK). This group of stocks’ market valuations are closest to OXY’s market valuation.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $705 million. That figure was $1.37 billion in OXY’s case. Target Corporation (NYSE:TGT) is the most popular stock in this table, while Enterprise Products Partners L.P. (NYSE:EPD) is the least popular one with only 21 bullish hedge fund positions. Occidental Petroleum Corporation (NYSE:OXY) on par with Target Corporation (NYSE:TGT), but has attracted a smaller share of the hedgies’ money. We are not going to hold that against them and recommend both OXY and TGT as potential candidates for a long position. Further research is necessary to find out which stock has a larger upside potential.