Is CVE Stock A Buy or Sell?

We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Cenovus Energy Inc (NYSE:CVE) based on that data.

Is CVE stock a buy? Prominent investors were taking a bullish view. The number of long hedge fund positions increased by 5 in recent months. Cenovus Energy Inc (NYSE:CVE) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 31. Our calculations also showed that CVE 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). 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.

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now 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. With all of this in mind we’re going to take a look at the fresh hedge fund action regarding Cenovus Energy Inc (NYSE:CVE).

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

At the end of December, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in CVE a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Richard S. Pzena’s Pzena Investment Management has the largest position in Cenovus Energy Inc (NYSE:CVE), worth close to $101.8 million, corresponding to 0.5% of its total 13F portfolio. The second largest stake is held by Adage Capital Management, led by Phill Gross and Robert Atchinson, holding a $33.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Renaissance Technologies, John Overdeck and David Siegel’s Two Sigma Advisors and Len Kipp and Xavier Majic’s Maple Rock Capital. In terms of the portfolio weights assigned to each position Maple Rock Capital allocated the biggest weight to Cenovus Energy Inc (NYSE:CVE), around 1.84% of its 13F portfolio. BeaconLight Capital is also relatively very bullish on the stock, setting aside 1.12 percent of its 13F equity portfolio to CVE.

As aggregate interest increased, key money managers were breaking ground themselves. Maple Rock Capital, managed by Len Kipp and Xavier Majic, initiated the biggest position in Cenovus Energy Inc (NYSE:CVE). Maple Rock Capital had $12.7 million invested in the company at the end of the quarter. Ed Bosek’s BeaconLight Capital also initiated a $3.7 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Mark Coe’s Intrinsic Edge Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cenovus Energy Inc (NYSE:CVE) but similarly valued. These stocks are Skillz Inc. (NYSE:SKLZ), InVitae Corporation (NYSE:NVTA), Bausch Health Companies Inc. (NYSE:BHC), US Foods Holding Corp. (NYSE:USFD), Arrow Electronics, Inc. (NYSE:ARW), Allakos Inc. (NASDAQ:ALLK), and argenx SE (NASDAQ:ARGX). This group of stocks’ market caps match CVE’s market cap.

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As you can see these stocks had an average of 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $1515 million. That figure was $238 million in CVE’s case. US Foods Holding Corp. (NYSE:USFD) is the most popular stock in this table. On the other hand Allakos Inc. (NASDAQ:ALLK) is the least popular one with only 11 bullish hedge fund positions. Cenovus Energy Inc (NYSE:CVE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CVE is 50.4. 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. 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 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on CVE as the stock returned 30.2% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.

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