After a lengthy stretch of outperformance, small-cap stocks suffered from July 2015 through June 2016, as heightened global economic fears led investors to flee to the safe havens of large-cap stocks and other instruments. Those stocks outperformed small-caps by about 10 percentage points during that time, with small-cap healthcare stocks being particularly hard hit. However, the tide has since turned in a big way, as evidenced by small-caps toppling their large-cap peers by 5 percentage points in the third quarter, and by another 5 percentage points in the first seven weeks of the fourth quarter. In this article, we’ll analyze how this shift affected hedge funds’ Q3 trading of Statoil ASA (ADR) (NYSE:STO) and see how the stock is affected by the recent hedge fund activity.
Hedge fund interest in Statoil ASA (ADR) (NYSE:STO) shares was flat at the end of last quarter, with 10 hedge funds bullish on the company. At the end of this article we will also compare STO to other stocks including EOG Resources Inc (NYSE:EOG), Eni SpA (ADR) (NYSE:E), and Honda Motor Co Ltd (ADR) (NYSE:HMC) to get a better sense of its popularity.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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How are hedge funds trading Statoil ASA (ADR) (NYSE:STO)?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards STO over the last 5 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world has the biggest position in Statoil ASA (ADR) (NYSE:STO), worth close to $72.6 million. The second largest stake is held by D E Shaw, with a $3.6 million position. Other peers with similar optimism include Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Matthew Tewksbury’s Stevens Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that said goodbye to their entire stakes in the stock during the third quarter. Interestingly, Charles Clough’s Clough Capital Partners said goodbye to the largest position of all the investors followed by Insider Monkey, comprising close to $8.7 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund said goodbye to about $1.9 million worth of shares.
Let’s also examine hedge fund activity in other stocks similar to Statoil ASA (ADR) (NYSE:STO). We will take a look at EOG Resources Inc (NYSE:EOG), Eni SpA (ADR) (NYSE:E), Honda Motor Co Ltd (ADR) (NYSE:HMC), and Caterpillar Inc. (NYSE:CAT). This group of stocks’ market caps are similar to STO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EOG | 51 | 1275879 | 15 |
| E | 4 | 24526 | -2 |
| HMC | 11 | 150009 | 3 |
| CAT | 32 | 1460921 | 1 |
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $728 million. That figure was $85 million in STO’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand Eni SpA (ADR) (NYSE:E) is the least popular one with only 4 bullish hedge fund positions. Statoil ASA (ADR) (NYSE:STO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard EOG might be a better candidate to consider taking a long position in.
Disclosure: None
