Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider Imperial Oil Limited (NYSE:IMO) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Imperial Oil Limited (NYSE:IMO) investors should pay attention to a decrease in hedge fund sentiment recently. Our calculations also showed that IMO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 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.
Ray Dalio of Bridgewater Associates
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the latest hedge fund action encompassing Imperial Oil Limited (NYSE:IMO).
What have hedge funds been doing with Imperial Oil Limited (NYSE:IMO)?
Heading into the first quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. By comparison, 19 hedge funds held shares or bullish call options in IMO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the biggest position in Imperial Oil Limited (NYSE:IMO), worth close to $11.7 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which holds a $7.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Noam Gottesman’s GLG Partners, Ray Dalio’s Bridgewater Associates and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position CSat Investment Advisory allocated the biggest weight to Imperial Oil Limited (NYSE:IMO), around 0.15% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to IMO.
Seeing as Imperial Oil Limited (NYSE:IMO) has faced bearish sentiment from hedge fund managers, it’s easy to see that there were a few fund managers that slashed their positions entirely heading into Q4. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest stake of all the hedgies monitored by Insider Monkey, worth about $2.1 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $1.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Imperial Oil Limited (NYSE:IMO). These stocks are 0, Seattle Genetics, Inc. (NASDAQ:SGEN), Franco-Nevada Corporation (NYSE:FNV), and Cadence Design Systems Inc (NASDAQ:CDNS). All of these stocks’ market caps are closest to IMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCOM | 31 | 1031564 | -8 |
| SGEN | 36 | 6196536 | 7 |
| FNV | 24 | 796996 | 1 |
| CDNS | 42 | 1534323 | 6 |
| Average | 33.25 | 2389855 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $2390 million. That figure was $35 million in IMO’s case. Cadence Design Systems Inc (NASDAQ:CDNS) is the most popular stock in this table. On the other hand Franco-Nevada Corporation (NYSE:FNV) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Imperial Oil Limited (NYSE:IMO) is even less popular than FNV. Hedge funds dodged a bullet by taking a bearish stance towards IMO. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately IMO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IMO investors were disappointed as the stock returned -58.5% during the same time 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 most of these stocks already outperformed the market so far in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
