In this article we will check out the progression of hedge fund sentiment towards Phillips 66 (NYSE:PSX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Phillips 66 (NYSE:PSX) investors should be aware of a decrease in enthusiasm from smart money of late. Our calculations also showed that PSX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are plenty of tools market participants employ to value stocks. A duo of the most useful tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outclass the market by a superb amount (see the details here).
Jonathan Barrett of Luminus Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the recent hedge fund action regarding Phillips 66 (NYSE:PSX).
What does smart money think about Phillips 66 (NYSE:PSX)?
Heading into the second quarter of 2020, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PSX over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Phillips 66 (NYSE:PSX) was held by AQR Capital Management, which reported holding $50.8 million worth of stock at the end of September. It was followed by D E Shaw with a $50 million position. Other investors bullish on the company included Millennium Management, Two Sigma Advisors, and Encompass Capital Advisors. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Phillips 66 (NYSE:PSX), around 9.98% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, earmarking 7.11 percent of its 13F equity portfolio to PSX.
Seeing as Phillips 66 (NYSE:PSX) has witnessed bearish sentiment from hedge fund managers, we can see that there exists a select few hedge funds that elected to cut their entire stakes by the end of the third quarter. Interestingly, Renaissance Technologies dropped the largest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $214.2 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $51 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Phillips 66 (NYSE:PSX). We will take a look at NXP Semiconductors NV (NASDAQ:NXPI), Veeva Systems Inc (NYSE:VEEV), SYSCO Corporation (NYSE:SYY), and Capital One Financial Corp. (NYSE:COF). This group of stocks’ market values are similar to PSX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NXPI | 52 | 1234255 | -28 |
| VEEV | 33 | 352902 | -11 |
| SYY | 35 | 1783679 | 7 |
| COF | 50 | 1107098 | 0 |
| Average | 42.5 | 1119484 | -8 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $1119 million. That figure was $420 million in PSX’s case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Veeva Systems Inc (NYSE:VEEV) is the least popular one with only 33 bullish hedge fund positions. Phillips 66 (NYSE:PSX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on PSX as the stock returned 47.7% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
