How do we determine whether Cenovus Energy Inc (NYSE:CVE) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Cenovus Energy Inc (NYSE:CVE) undervalued? Hedge funds are becoming more confident. The number of long hedge fund bets improved by 3 recently. Our calculations also showed that cve isn’t among the 30 most popular stocks among hedge funds. CVE was in 23 hedge funds’ portfolios at the end of March. There were 20 hedge funds in our database with CVE positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the fresh hedge fund action regarding Cenovus Energy Inc (NYSE:CVE).
Hedge fund activity in Cenovus Energy Inc (NYSE:CVE)
At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the fourth quarter of 2018. On the other hand, there were a total of 18 hedge funds with a bullish position in CVE a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the number one position in Cenovus Energy Inc (NYSE:CVE). Pzena Investment Management has a $181.4 million position in the stock, comprising 1% of its 13F portfolio. The second most bullish fund manager is Luminus Management, managed by Jonathan Barrett and Paul Segal, which holds a $149 million position; the fund has 3.2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Jonathan Barrett and Paul Segal’s Luminus Management, Alex Snow’s Lansdowne Partners and Michael Kaufman’s MAK Capital One.
As industrywide interest jumped, specific money managers have jumped into Cenovus Energy Inc (NYSE:CVE) headfirst. Lansdowne Partners, managed by Alex Snow, initiated the biggest position in Cenovus Energy Inc (NYSE:CVE). Lansdowne Partners had $44.9 million invested in the company at the end of the quarter. Michael Kaufman’s MAK Capital One also initiated a $17.4 million position during the quarter. The following funds were also among the new CVE investors: Jim Simons’s Renaissance Technologies, Matthew Hulsizer’s PEAK6 Capital Management, and Till Bechtolsheimer’s Arosa Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Cenovus Energy Inc (NYSE:CVE). These stocks are Domino’s Pizza, Inc. (NYSE:DPZ), Micro Focus International plc (NYSE:MFGP), Wheaton Precious Metals Corp. (NYSE:WPM), and TechnipFMC plc (NYSE:FTI). This group of stocks’ market caps are similar to CVE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DPZ | 32 | 1861496 | 0 |
| MFGP | 4 | 37735 | -4 |
| WPM | 19 | 324663 | -2 |
| FTI | 25 | 617440 | 4 |
| Average | 20 | 710334 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $710 million. That figure was $455 million in CVE’s case. Domino’s Pizza, Inc. (NYSE:DPZ) is the most popular stock in this table. On the other hand Micro Focus International plc (NYSE:MFGP) is the least popular one with only 4 bullish hedge fund positions. Cenovus Energy Inc (NYSE:CVE) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CVE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CVE were disappointed as the stock returned -4% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
