Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards CNOOC Limited (NYSE:CEO).
CNOOC Limited (NYSE:CEO) shareholders have witnessed an increase in hedge fund sentiment of late. CEO was in 15 hedge funds’ portfolios at the end of September. There were 9 hedge funds in our database with CEO positions at the end of the previous quarter. Our calculations also showed that CEO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Howard Marks of Oaktree Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the fresh hedge fund action regarding CNOOC Limited (NYSE:CEO).
How are hedge funds trading CNOOC Limited (NYSE:CEO)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 67% from the second quarter of 2019. By comparison, 15 hedge funds held shares or bullish call options in CEO a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in CNOOC Limited (NYSE:CEO), which was worth $125.3 million at the end of the third quarter. On the second spot was Oaktree Capital Management which amassed $51.5 million worth of shares. Arrowstreet Capital, Maverick Capital, and LMR Partners 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 Oaktree Capital Management allocated the biggest weight to CNOOC Limited (NYSE:CEO), around 1.01% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, earmarking 0.22 percent of its 13F equity portfolio to CEO.
As industrywide interest jumped, some big names were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, initiated the most outsized position in CNOOC Limited (NYSE:CEO). LMR Partners had $4.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace also initiated a $0.7 million position during the quarter. The other funds with brand new CEO positions are Mike Vranos’s Ellington, Dmitry Balyasny’s Balyasny Asset Management, and Michael Gelband’s ExodusPoint Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CNOOC Limited (NYSE:CEO) but similarly valued. We will take a look at PJT Partners Inc (NYSE:PJT), Pacira BioSciences, Inc. (NASDAQ:PCRX), Studio City International Holdings Limited (NYSE:MSC), and Shenandoah Telecommunications Company (NASDAQ:SHEN). This group of stocks’ market caps are similar to CEO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PJT | 17 | 149204 | 2 |
| PCRX | 28 | 394779 | 0 |
| MSC | 4 | 243082 | 0 |
| SHEN | 15 | 78895 | -3 |
| Average | 16 | 216490 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $207 million in CEO’s case. Pacira Pharmaceuticals Inc (NASDAQ:PCRX) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 4 bullish hedge fund positions. CNOOC Limited (NYSE:CEO) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CEO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CEO investors were disappointed as the stock returned -4.6% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
