Is BP Stock A Buy or Sell?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards BP plc (NYSE:BP).

Is BP stock a buy or sell? BP plc (NYSE:BP) investors should be aware of a decrease in hedge fund interest in recent months. BP plc (NYSE:BP) was in 29 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 40. There were 30 hedge funds in our database with BP positions at the end of the third quarter. Our calculations also showed that BP isn’t among the 30 most popular stocks among hedge funds (click for Q4 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’ 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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Minhua Zhang of Weld Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to check out the key hedge fund action encompassing BP plc (NYSE:BP).

Do Hedge Funds Think BP Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in BP a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

The largest stake in BP plc (NYSE:BP) was held by Arrowstreet Capital, which reported holding $425.5 million worth of stock at the end of December. It was followed by Fisher Asset Management with a $224.3 million position. Other investors bullish on the company included Inclusive Capital, Orbis Investment Management, and Kahn Brothers. In terms of the portfolio weights assigned to each position Kahn Brothers allocated the biggest weight to BP plc (NYSE:BP), around 6.54% of its 13F portfolio. Inclusive Capital is also relatively very bullish on the stock, dishing out 6.18 percent of its 13F equity portfolio to BP.

Judging by the fact that BP plc (NYSE:BP) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that elected to cut their positions entirely last quarter. Interestingly, Till Bechtolsheimer’s Arosa Capital Management cut the largest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $10.6 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dumped about $8.3 million worth. These moves are important to note, as total hedge fund interest fell by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as BP plc (NYSE:BP) but similarly valued. We will take a look at CSX Corporation (NASDAQ:CSX), FedEx Corporation (NYSE:FDX), Crown Castle International Corp. (REIT) (NYSE:CCI), Lam Research Corporation (NASDAQ:LRCX), Duke Energy Corporation (NYSE:DUK), Autodesk, Inc. (NASDAQ:ADSK), and The Sherwin-Williams Company (NYSE:SHW). This group of stocks’ market caps match BP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.9 hedge funds with bullish positions and the average amount invested in these stocks was $2292 million. That figure was $927 million in BP’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 38 bullish hedge fund positions. Compared to these stocks BP plc (NYSE:BP) is even less popular than DUK. Our overall hedge fund sentiment score for BP is 25.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on BP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on BP as the stock returned 21.6% since Q4 (through April 12th) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.