Is Southwestern Energy Company (SWN) Going to Burn These Hedge Funds?

In this article we will take a look at whether hedge funds think Southwestern Energy Company (NYSE:SWN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Southwestern Energy Company (NYSE:SWN) going to take off soon? The smart money was taking an optimistic view. The number of long hedge fund bets went up by 5 in recent months. Southwestern Energy Company (NYSE:SWN) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistic is 48. Our calculations also showed that SWN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 22 hedge funds in our database with SWN positions at the end of the first quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

David Iben of Kopernik Global Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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. With all of this in mind let’s take a glance at the latest hedge fund action surrounding Southwestern Energy Company (NYSE:SWN).

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

At the end of June, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SWN over the last 24 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

The largest stake in Southwestern Energy Company (NYSE:SWN) was held by Kopernik Global Investors, which reported holding $92.1 million worth of stock at the end of June. It was followed by D E Shaw with a $48.8 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Kopernik Global Investors allocated the biggest weight to Southwestern Energy Company (NYSE:SWN), around 9.65% of its 13F portfolio. Nierenberg Investment Management is also relatively very bullish on the stock, setting aside 0.76 percent of its 13F equity portfolio to SWN.

As aggregate interest increased, key hedge funds have jumped into Southwestern Energy Company (NYSE:SWN) headfirst. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, established the most valuable position in Southwestern Energy Company (NYSE:SWN). SIR Capital Management had $3.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $3.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Charles Davidson and Joseph Jacobs’s Wexford Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Southwestern Energy Company (NYSE:SWN). These stocks are Turning Point Therapeutics, Inc. (NASDAQ:TPTX), Dillard’s, Inc. (NYSE:DDS), The Brink’s Company (NYSE:BCO), Papa John’s International, Inc. (NASDAQ:PZZA), New Jersey Resources Corp (NYSE:NJR), Academy Sports and Outdoors, Inc. (NASDAQ:ASO), and Kulicke and Soffa Industries Inc. (NASDAQ:KLIC). This group of stocks’ market caps match SWN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $413 million. That figure was $258 million in SWN’s case. Academy Sports and Outdoors, Inc. (NASDAQ:ASO) is the most popular stock in this table. On the other hand New Jersey Resources Corp (NYSE:NJR) is the least popular one with only 12 bullish hedge fund positions. Southwestern Energy Company (NYSE:SWN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SWN is 49.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately SWN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SWN were disappointed as the stock returned -9.9% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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