How Canadian Natural Resource Ltd (USA) (CNQ) Stacks Up Against Its Peers

Is Canadian Natural Resource Ltd (USA) (NYSE:CNQ) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Canadian Natural Resource Ltd (USA) (NYSE:CNQ) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of the third quarter of 2016. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Yum! Brands, Inc. (NYSE:YUM), Estee Lauder Companies Inc (NYSE:EL), and Emerson Electric Co. (NYSE:EMR) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, let’s take a glance at the key action surrounding Canadian Natural Resource Ltd (USA) (NYSE:CNQ).

How have hedgies been trading Canadian Natural Resource Ltd (USA) (NYSE:CNQ)?

Heading into the fourth quarter of 2016, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Robert Pohly’s Samlyn Capital has the most valuable position in Canadian Natural Resource Ltd (USA) (NYSE:CNQ), worth close to $72.6 million, amounting to 1.7% of its total 13F portfolio. Sitting at the No. 2 spot is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which holds a $52.7 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Daniel Bubis’s Tetrem Capital Management, Dmitry Balyasny’s Balyasny Asset Management and John Burbank’s Passport Capital.

Judging by the fact that Canadian Natural Resource Ltd (USA) (NYSE:CNQ) has faced declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies who were dropping their full holdings in the third quarter. Interestingly, Jean-Marie Eveillard’s First Eagle Investment Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, worth close to $154.3 million in stock, and Jorge Paulo Lemann’s 3G Capital was right behind this move, as the fund said goodbye to about $30.8 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to Canadian Natural Resource Ltd (USA) (NYSE:CNQ). We will take a look at Yum! Brands, Inc. (NYSE:YUM), Estee Lauder Companies Inc (NYSE:EL), Emerson Electric Co. (NYSE:EMR), and Charles Schwab Corp (NYSE:SCHW). This group of stocks’ market valuations match CNQ’s market valuation.

As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $1965 million. That figure was $405 million in CNQ’s case. Charles Schwab Corp (NYSE:SCHW) is the most popular stock in this table. On the other hand Emerson Electric Co. (NYSE:EMR) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Canadian Natural Resource Ltd (USA) (NYSE:CNQ) is even less popular than EMR. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.