Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Exxon Mobil Corporation (NYSE:XOM) a healthy stock for your portfolio? Money managers are buying. The number of long hedge fund bets improved by 1 recently even though hedge fund sentiment towards the stock is near its all time low. Our calculations also showed that XOM ranked 100th and isn’t among the 30 most popular stocks among hedge funds. XOM was in 50 hedge funds’ portfolios at the end of the second quarter of 2019. There were 49 hedge funds in our database with XOM positions at the end of the previous quarter.
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’ 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the recent hedge fund action encompassing Exxon Mobil Corporation (NYSE:XOM).
How have hedgies been trading Exxon Mobil Corporation (NYSE:XOM)?
Heading into the third quarter of 2019, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in XOM over the last 16 quarters. 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, Fisher Asset Management held the most valuable stake in Exxon Mobil Corporation (NYSE:XOM), which was worth $431.5 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $228.4 million worth of shares. Moreover, Pzena Investment Management, Yacktman Asset Management, and Adage Capital Management were also bullish on Exxon Mobil Corporation (NYSE:XOM), allocating a large percentage of their portfolios to this stock.
Now, specific money managers have been driving this bullishness. Carlson Capital, managed by Clint Carlson, assembled the most valuable position in Exxon Mobil Corporation (NYSE:XOM). Carlson Capital had $34.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $31.8 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury’s Stevens Capital Management, Ilan Assouline’s Circle Road Advisors, and Kenneth Tropin’s Graham Capital Management.
Let’s go over hedge fund activity in other stocks similar to Exxon Mobil Corporation (NYSE:XOM). These stocks are Walmart Inc. (NYSE:WMT), The Procter & Gamble Company (NYSE:PG), Bank of America Corporation (NYSE:BAC), and Mastercard Incorporated (NYSE:MA). This group of stocks’ market valuations are closest to XOM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WMT | 56 | 4984995 | -1 |
| PG | 58 | 9859098 | 2 |
| BAC | 94 | 31516647 | -2 |
| MA | 99 | 12042278 | 5 |
| Average | 76.75 | 14600755 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 76.75 hedge funds with bullish positions and the average amount invested in these stocks was $14601 million. That figure was $1332 million in XOM’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand Walmart Inc. (NYSE:WMT) is the least popular one with only 56 bullish hedge fund positions. Compared to these stocks Exxon Mobil Corporation (NYSE:XOM) is even less popular than WMT. Hedge funds dodged a bullet by taking a bearish stance towards XOM. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately XOM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); XOM investors were disappointed as the stock returned -6.7% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
