Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Hedge fund interest in Hess Corp. (NYSE:HES) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare HES to other stocks including Eversource Energy (NYSE:ES), Devon Energy Corp (NYSE:DVN), and Vornado Realty Trust (NYSE:VNO) to get a better sense of its popularity.
Follow Hess Corp (NYSE:HES)
Follow Hess Corp (NYSE:HES)
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, we’re going to take a glance at the recent action regarding Hess Corp. (NYSE:HES).
What does the smart money think about Hess Corp. (NYSE:HES)?
At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Elliott Management, managed by Paul Singer, holds the largest position in Hess Corp. (NYSE:HES). The fund has a $1.01 billion position in the stock, comprising 8.2% of its 13F portfolio. The second largest stake is held by Levin Capital Strategies, led by John A. Levin, holding an $82.6 million position; the fund has 1.2% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Robert Polak’s Anchor Bolt Capital, and Leon Cooperman’s Omega Advisors.
Because Hess Corp. (NYSE:HES) has witnessed unchanged sentiment from the aggregate hedge fund industry, it’s important to look at the funds that slashed their positions entirely heading into Q4. At the top of the heap, Phill Gross and Robert Atchinson’s Adage Capital Management cut the largest position of all the hedgies watched by Insider Monkey, worth an estimated $123.9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $26.6 million worth of shares. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Hess Corp. (NYSE:HES) but similarly valued. These stocks are Eversource Energy (NYSE:ES), Devon Energy Corp (NYSE:DVN), Vornado Realty Trust (NYSE:VNO), and M&T Bank Corporation (NYSE:MTB). This group of stocks’ market values are similar to HES’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ES | 20 | 329160 | 4 |
| DVN | 50 | 1340988 | -11 |
| VNO | 24 | 264017 | 2 |
| MTB | 22 | 786073 | 4 |
As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $680 million. That figure was $1.58 billion in HES’s case. Devon Energy Corp (NYSE:DVN) is the most popular stock in this table. On the other hand Eversource Energy (NYSE:ES) is the least popular one with only 20 bullish hedge fund positions. Hess Corp. (NYSE:HES) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DVN might be a better candidate to consider a long position.
Disclosure: none.
