Is Devon Energy (DVN) Stock A Buy or Sell?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Devon Energy Corporation (NYSE:DVN)? The smart money sentiment can provide an answer to this question.

Is DVN stock a buy or sell? Devon Energy Corporation (NYSE:DVN) has seen an increase in support from the world’s most elite money managers in recent months. Devon Energy Corporation (NYSE:DVN) was in 45 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 61. There were 44 hedge funds in our database with DVN holdings at the end of September. Our calculations also showed that DVN 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Michael Gelband of ExodusPoint Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). Now let’s take a look at the new hedge fund action encompassing Devon Energy Corporation (NYSE:DVN).

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

At fourth quarter’s end, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DVN over the last 22 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Devon Energy Corporation (NYSE:DVN), which was worth $90.3 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $80.4 million worth of shares. Two Sigma Advisors, Millennium Management, and Fisher Asset 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 SIR Capital Management allocated the biggest weight to Devon Energy Corporation (NYSE:DVN), around 6.63% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, designating 3 percent of its 13F equity portfolio to DVN.

As aggregate interest increased, key money managers were breaking ground themselves. Impala Asset Management, managed by Robert Bishop, initiated the most valuable position in Devon Energy Corporation (NYSE:DVN). Impala Asset Management had $33.3 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $33.1 million position during the quarter. The other funds with new positions in the stock are Zach Schreiber’s Point State Capital, Benjamin A. Smith’s Laurion Capital Management, and Mark Coe’s Intrinsic Edge Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Devon Energy Corporation (NYSE:DVN) but similarly valued. We will take a look at Western Alliance Bancorporation (NYSE:WAL), Targa Resources Corp (NYSE:TRGP), LG Display Co Ltd. (NYSE:LPL), Shift4 Payments, Inc. (NYSE:FOUR), Phillips 66 Partners LP (NYSE:PSXP), PLDT Inc. (NYSE:PHI), and Haemonetics Corporation (NYSE:HAE). This group of stocks’ market valuations match DVN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $286 million. That figure was $709 million in DVN’s case. Shift4 Payments, Inc. (NYSE:FOUR) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Devon Energy Corporation (NYSE:DVN) is more popular among hedge funds. Our overall hedge fund sentiment score for DVN is 78.1. 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 returned 5.3% in 2021 through March 19th but still managed to beat the market by 0.8 percentage points. Hedge funds were also right about betting on DVN as the stock returned 45.3% since the end of December (through 3/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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