How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding BP plc (NYSE:BP).
BP plc (NYSE:BP) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistic is 40. BP has experienced an increase in support from the world’s most elite money managers recently. There were 29 hedge funds in our database with BP holdings at the end of March. Our calculations also showed that BP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Today there are a lot of metrics stock traders employ to analyze publicly traded companies. A pair of the best metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best fund managers can trounce the broader indices by a solid amount (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
John Paulson of Paulson & Co
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 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. Now let’s take a peek at the new hedge fund action regarding BP plc (NYSE:BP).
Do Hedge Funds Think BP Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the first quarter of 2020. On the other hand, there were a total of 27 hedge funds with a bullish position in BP a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of BP plc (NYSE:BP), with a stake worth $317.5 million reported as of the end of June. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $138.6 million. Orbis Investment Management, Two Sigma Advisors, 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 Kahn Brothers allocated the biggest weight to BP plc (NYSE:BP), around 8.19% of its 13F portfolio. Stamos Capital is also relatively very bullish on the stock, setting aside 3.19 percent of its 13F equity portfolio to BP.
As aggregate interest increased, some big names have been driving this bullishness. Paulson & Co, managed by John Paulson, initiated the largest position in BP plc (NYSE:BP). Paulson & Co had $51.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $17.2 million position during the quarter. The other funds with brand new BP positions are Till Bechtolsheimer’s Arosa Capital Management, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Tony Davis’s Inherent Group.
Let’s check out hedge fund activity in other stocks similar to BP plc (NYSE:BP). We will take a look at Zoetis Inc (NYSE:ZTS), Prologis Inc (NYSE:PLD), Altria Group Inc (NYSE:MO), Fidelity National Information Services Inc. (NYSE:FIS), Mondelez International Inc (NASDAQ:MDLZ), NIO Inc. (NYSE:NIO), and Gilead Sciences, Inc. (NASDAQ:GILD). This group of stocks’ market caps are similar to BP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZTS | 58 | 2705785 | 0 |
| PLD | 40 | 563748 | 1 |
| MO | 47 | 948996 | 9 |
| FIS | 72 | 7369909 | -2 |
| MDLZ | 53 | 2946868 | 8 |
| NIO | 34 | 2066911 | 6 |
| GILD | 54 | 1732734 | -11 |
| Average | 51.1 | 2619279 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.1 hedge funds with bullish positions and the average amount invested in these stocks was $2619 million. That figure was $1081 million in BP’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand NIO Inc. (NYSE:NIO) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks BP plc (NYSE:BP) is even less popular than NIO. Our overall hedge fund sentiment score for BP is 28.5. 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. Hedge funds dodged a bullet by taking a bearish stance towards BP. Our calculations showed that the top 5 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th but managed to beat the market again by 3.1 percentage points. Unfortunately BP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); BP investors were disappointed as the stock returned 6.8% since the end of the second quarter (through 11/5) 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 most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
