Is ConocoPhillips (NYSE:COP) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to find the winners in the stock market.
Is ConocoPhillips (NYSE:COP) a healthy stock for your portfolio? The smart money is taking a bullish view. The number of long hedge fund positions inched up by 4 recently. Our calculations also showed that COP isn’t among the 30 most popular stocks among hedge funds. COP was in 59 hedge funds’ portfolios at the end of December. There were 55 hedge funds in our database with COP 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’ 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 market by 32 percentage points since May 2014 through March 12, 2019 (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’re going to take a glance at the key hedge fund action encompassing ConocoPhillips (NYSE:COP).
What have hedge funds been doing with ConocoPhillips (NYSE:COP)?
Heading into the first quarter of 2019, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in COP over the last 14 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in ConocoPhillips (NYSE:COP) was held by AQR Capital Management, which reported holding $497.8 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $261.1 million position. Other investors bullish on the company included D E Shaw, Point72 Asset Management, and GLG Partners.
As industrywide interest jumped, specific money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, created the biggest position in ConocoPhillips (NYSE:COP). Point72 Asset Management had $176.5 million invested in the company at the end of the quarter. Ryan Caldwell’s Chiron Investment Management also initiated a $33.6 million position during the quarter. The other funds with brand new COP positions are Anand Parekh’s Alyeska Investment Group, Benjamin A. Smith’s Laurion Capital Management, and Matt Smith’s Deep Basin Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ConocoPhillips (NYSE:COP) but similarly valued. These stocks are Equinor ASA (NYSE:EQNR), American Tower Corporation (NYSE:AMT), QUALCOMM, Incorporated (NASDAQ:QCOM), and Morgan Stanley (NYSE:MS). All of these stocks’ market caps are closest to COP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQNR | 13 | 341572 | 1 |
| AMT | 41 | 2590156 | -1 |
| QCOM | 51 | 2269214 | 3 |
| MS | 57 | 4019419 | 6 |
| Average | 40.5 | 2305090 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $2305 million. That figure was $1985 million in COP’s case. Morgan Stanley (NYSE:MS) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks ConocoPhillips (NYSE:COP) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately COP wasn’t in this group. Hedge funds that bet on COP were disappointed as the stock returned 8.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
