Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Equinor ASA (NYSE:EQNR).
Equinor ASA (NYSE:EQNR) investors should be aware of an increase in hedge fund sentiment in recent months. EQNR was in 14 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with EQNR holdings at the end of the previous quarter. Our calculations also showed that EQNR 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steven Cohen of Point72 Asset 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. Let’s go over the latest hedge fund action surrounding Equinor ASA (NYSE:EQNR).
Hedge fund activity in Equinor ASA (NYSE:EQNR)
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in EQNR a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the largest position in Equinor ASA (NYSE:EQNR), worth close to $209.7 million, corresponding to 0.2% of its total 13F portfolio. The second most bullish fund manager is Steve Cohen of Point72 Asset Management, with a $43.6 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Ken Fisher’s Fisher Asset Management, Matt Smith’s Deep Basin Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Deep Basin Capital allocated the biggest weight to Equinor ASA (NYSE:EQNR), around 2.35% of its 13F portfolio. Point72 Asset Management is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to EQNR.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Equinor ASA (NYSE:EQNR) headfirst. Deep Basin Capital, managed by Matt Smith, assembled the most valuable position in Equinor ASA (NYSE:EQNR). Deep Basin Capital had $29.7 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new EQNR investors: Ken Griffin’s Citadel Investment Group and Minhua Zhang’s Weld Capital Management.
Let’s now review hedge fund activity in other stocks similar to Equinor ASA (NYSE:EQNR). These stocks are Enterprise Products Partners L.P. (NYSE:EPD), The PNC Financial Services Group Inc. (NYSE:PNC), Intuitive Surgical, Inc. (NASDAQ:ISRG), and Anthem Inc (NYSE:ANTM). This group of stocks’ market valuations resemble EQNR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EPD | 21 | 301985 | 2 |
| PNC | 39 | 2074279 | 1 |
| ISRG | 41 | 1400552 | 4 |
| ANTM | 59 | 3721999 | -7 |
| Average | 40 | 1874704 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $1875 million. That figure was $392 million in EQNR’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table. On the other hand Enterprise Products Partners L.P. (NYSE:EPD) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Equinor ASA (NYSE:EQNR) is even less popular than EPD. Hedge funds dodged a bullet by taking a bearish stance towards EQNR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EQNR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); EQNR investors were disappointed as the stock returned -0.9% during the fourth quarter (through the end of November) 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 so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
