At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Southwestern Energy Company (NYSE:SWN).
Is Southwestern Energy Company (NYSE:SWN) an attractive investment now? Prominent investors are buying. The number of bullish hedge fund bets advanced by 2 in recent months. Our calculations also showed that SWN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the new hedge fund action surrounding Southwestern Energy Company (NYSE:SWN).
How are hedge funds trading Southwestern Energy Company (NYSE:SWN)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in SWN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Kopernik Global Investors held the most valuable stake in Southwestern Energy Company (NYSE:SWN), which was worth $47 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $7.2 million worth of shares. SIR Capital Management, Point72 Asset Management, and Arrowstreet Capital 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 Kopernik Global Investors allocated the biggest weight to Southwestern Energy Company (NYSE:SWN), around 10.01% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, dishing out 1.35 percent of its 13F equity portfolio to SWN.
As industrywide interest jumped, some big names were breaking ground themselves. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, initiated the largest position in Southwestern Energy Company (NYSE:SWN). SIR Capital Management had $3.1 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $2.2 million position during the quarter. The other funds with brand new SWN positions are Dmitry Balyasny’s Balyasny Asset Management, Jim O’Brien and Jonathan Dorfman’s Napier Park Global Capital, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Southwestern Energy Company (NYSE:SWN) but similarly valued. These stocks are 3D Systems Corporation (NYSE:DDD), Nova Measuring Instruments Ltd. (NASDAQ:NVMI), Zuora, Inc. (NYSE:ZUO), and Scientific Games Corp (NASDAQ:SGMS). This group of stocks’ market caps are closest to SWN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DDD | 18 | 63617 | -1 |
| NVMI | 10 | 157943 | 0 |
| ZUO | 23 | 102623 | -3 |
| SGMS | 22 | 226145 | -11 |
| Average | 18.25 | 137582 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $66 million in SWN’s case. Zuora, Inc. (NYSE:ZUO) is the most popular stock in this table. On the other hand Nova Measuring Instruments Ltd. (NASDAQ:NVMI) is the least popular one with only 10 bullish hedge fund positions. Southwestern Energy Company (NYSE:SWN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on SWN as the stock returned 60.4% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
