It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Exxon Mobil Corporation (NYSE:XOM).
Is Exxon Mobil Corporation (NYSE:XOM) worth your attention right now? Prominent investors are in a bearish mood. The number of long hedge fund positions retreated by 2 recently. Our calculations also showed that XOM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to take a look at the key hedge fund action regarding Exxon Mobil Corporation (NYSE:XOM).
How have hedgies been trading Exxon Mobil Corporation (NYSE:XOM)?
At Q3’s end, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards XOM over the last 17 quarters. So, let’s review 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 $466.1 million at the end of the third quarter. On the second spot was Pzena Investment Management which amassed $176 million worth of shares. Yacktman Asset Management, Adage Capital Management, and AQR Capital Management 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 Lucas Capital Management allocated the biggest weight to Exxon Mobil Corporation (NYSE:XOM), around 2.58% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, dishing out 1.99 percent of its 13F equity portfolio to XOM.
Since Exxon Mobil Corporation (NYSE:XOM) has faced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who were dropping their entire stakes in the third quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management dumped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $7.1 million in stock, and Ilan Assouline’s Circle Road Advisors was right behind this move, as the fund dropped about $6.5 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds in the third quarter.
Let’s now review hedge fund activity in other stocks similar to Exxon Mobil Corporation (NYSE:XOM). We will take a look at AT&T Inc. (NYSE:T), Mastercard Incorporated (NYSE:MA), Bank of America Corporation (NYSE:BAC), and The Home Depot, Inc. (NYSE:HD). This group of stocks’ market valuations are similar to XOM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| T | 46 | 1515476 | 4 |
| MA | 114 | 13206727 | 15 |
| BAC | 95 | 32049756 | 1 |
| HD | 60 | 4349926 | 7 |
| Average | 78.75 | 12780471 | 6.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 78.75 hedge funds with bullish positions and the average amount invested in these stocks was $12780 million. That figure was $1365 million in XOM’s case. Mastercard Incorporated (NYSE:MA) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 46 bullish hedge fund positions. Exxon Mobil Corporation (NYSE:XOM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately XOM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); XOM investors were disappointed as the stock returned 8% in 2019 (as of 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019.
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.
