In this article we will check out the progression of hedge fund sentiment towards SM Energy Company (NYSE:SM) 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.
SM Energy Company (NYSE:SM) shareholders have witnessed a decrease in activity from the world’s largest hedge funds recently. SM Energy Company (NYSE:SM) was in 24 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 32. There were 25 hedge funds in our database with SM holdings at the end of June. Our calculations also showed that SM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Sander Gerber of Hudson Bay Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla 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. Now we’re going to analyze the recent hedge fund action regarding SM Energy Company (NYSE:SM).
Do Hedge Funds Think SM Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SM over the last 25 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of SM Energy Company (NYSE:SM), with a stake worth $58 million reported as of the end of September. Trailing Millennium Management was D E Shaw, which amassed a stake valued at $57.8 million. Two Sigma Advisors, Slate Path Capital, and Arrowstreet Capital 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 Hill City Capital allocated the biggest weight to SM Energy Company (NYSE:SM), around 3.88% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, earmarking 1.42 percent of its 13F equity portfolio to SM.
Since SM Energy Company (NYSE:SM) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few fund managers that slashed their full holdings in the third quarter. Interestingly, Len Kipp and Xavier Majic’s Maple Rock Capital dropped the largest investment of all the hedgies monitored by Insider Monkey, comprising about $40.7 million in stock. Richard Driehaus’s fund, Driehaus Capital, also dumped its stock, about $9.7 million worth. These transactions are interesting, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as SM Energy Company (NYSE:SM) but similarly valued. These stocks are Kennedy-Wilson Holdings Inc (NYSE:KW), Compania Cervecerias Unidas S.A. (NYSE:CCU), AtriCure Inc. (NASDAQ:ATRC), Installed Building Products Inc (NYSE:IBP), GATX Corporation (NYSE:GATX), ZipRecruiter Inc. (NYSE:ZIP), and Integral Ad Science Holding Corp. (NASDAQ:IAS). This group of stocks’ market valuations are closest to SM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KW | 13 | 503305 | -5 |
| CCU | 7 | 21568 | -2 |
| ATRC | 21 | 243485 | 0 |
| IBP | 15 | 38662 | 3 |
| GATX | 12 | 192518 | -5 |
| ZIP | 10 | 87951 | 5 |
| IAS | 19 | 2094672 | -11 |
| Average | 13.9 | 454594 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $455 million. That figure was $322 million in SM’s case. AtriCure Inc. (NASDAQ:ATRC) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks SM Energy Company (NYSE:SM) is more popular among hedge funds. Our overall hedge fund sentiment score for SM is 76.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 31.1% in 2021 through December 9th but still managed to beat the market by 5.1 percentage points. Hedge funds were also right about betting on SM as the stock returned 19.6% since the end of September (through 12/9) 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.
Follow Sm Energy Co (NYSE:SM)
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Disclosure: None. This article was originally published at Insider Monkey.
