Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 20 stock picks easily bested the broader market, at 37.4% compared to 27.5%, despite there being a few duds in there like Berkshire Hathaway (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
TOTAL S.A. (NYSE:TOT) was in 17 hedge funds’ portfolios at the end of the third quarter of 2019. TOT has experienced an increase in hedge fund sentiment lately. There were 13 hedge funds in our database with TOT positions at the end of the previous quarter. Our calculations also showed that TOT 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.
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 take a gander at the new hedge fund action regarding TOTAL S.A. (NYSE:TOT).
Hedge fund activity in TOTAL S.A. (NYSE:TOT)
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TOT over the last 17 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in TOTAL S.A. (NYSE:TOT), which was worth $1014.2 million at the end of the third quarter. On the second spot was Alyeska Investment Group which amassed $25.3 million worth of shares. Citadel Investment Group, Adage Capital Management, and Point72 Asset Management 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 Diametric Capital allocated the biggest weight to TOTAL S.A. (NYSE:TOT), around 1.39% of its 13F portfolio. Fisher Asset Management is also relatively very bullish on the stock, designating 1.11 percent of its 13F equity portfolio to TOT.
With a general bullishness amongst the heavyweights, some big names have jumped into TOTAL S.A. (NYSE:TOT) headfirst. Alyeska Investment Group, managed by Anand Parekh, assembled the largest position in TOTAL S.A. (NYSE:TOT). Alyeska Investment Group had $25.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $12.8 million position during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Paul Marshall and Ian Wace’s Marshall Wace, and Mario Gabelli’s GAMCO Investors.
Let’s go over hedge fund activity in other stocks similar to TOTAL S.A. (NYSE:TOT). We will take a look at Adobe Systems Incorporated (NASDAQ:ADBE), salesforce.com, inc. (NYSE:CRM), BP plc (NYSE:BP), and International Business Machines Corp. (NYSE:IBM). This group of stocks’ market caps are closest to TOT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADBE | 92 | 8325284 | 0 |
| CRM | 102 | 9433280 | 20 |
| BP | 36 | 1617309 | 7 |
| IBM | 42 | 1569607 | -3 |
| Average | 68 | 5236370 | 6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 68 hedge funds with bullish positions and the average amount invested in these stocks was $5236 million. That figure was $1095 million in TOT’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand BP plc (NYSE:BP) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks TOTAL S.A. (NYSE:TOT) is even less popular than BP. Hedge funds dodged a bullet by taking a bearish stance towards TOT. 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 TOT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); TOT investors were disappointed as the stock returned 1% 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.
