Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Exxon Mobil Corporation (NYSE:XOM).
Is Exxon Mobil Corporation (NYSE:XOM) a buy here? Investors who are in the know are taking an optimistic view. The number of long hedge fund positions went up by 8 in recent months. Our calculations also showed that XOM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind we’re going to take a peek at the latest hedge fund action regarding Exxon Mobil Corporation (NYSE:XOM).
What does smart money think about Exxon Mobil Corporation (NYSE:XOM)?
At Q4’s end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards XOM over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ken Fisher’s Fisher Asset Management has the largest position in Exxon Mobil Corporation (NYSE:XOM), worth close to $455.1 million, amounting to 0.5% of its total 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $216.7 million position; 0.5% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Phill Gross and Robert Atchinson’s Adage Capital Management, Renaissance Technologies and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Kamunting Street Capital allocated the biggest weight to Exxon Mobil Corporation (NYSE:XOM), around 8.53% of its 13F portfolio. Lucas Capital Management is also relatively very bullish on the stock, designating 2.28 percent of its 13F equity portfolio to XOM.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Renaissance Technologies, established the largest position in Exxon Mobil Corporation (NYSE:XOM). Renaissance Technologies had $190.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $156.6 million position during the quarter. The following funds were also among the new XOM investors: Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Donald Sussman’s Paloma Partners, and Matthew Tewksbury’s Stevens Capital Management.
Let’s check out hedge fund activity in other stocks similar to Exxon Mobil Corporation (NYSE:XOM). We will take a look at AT&T Inc. (NYSE:T), UnitedHealth Group Inc. (NYSE:UNH), The Walt Disney Company (NYSE:DIS), and Intel Corporation (NASDAQ:INTC). All of these stocks’ market caps match XOM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| T | 50 | 1406918 | -1 |
| UNH | 91 | 7896286 | 3 |
| DIS | 118 | 4968497 | 3 |
| INTC | 58 | 6147008 | -6 |
| Average | 79.25 | 5104677 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 79.25 hedge funds with bullish positions and the average amount invested in these stocks was $5105 million. That figure was $2028 million in XOM’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 50 bullish hedge fund positions. Exxon Mobil Corporation (NYSE:XOM) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately XOM wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); XOM investors were disappointed as the stock returned -39% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
