Was The Smart Money Right About Occidental (OXY)?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Occidental Petroleum Corporation (NYSE:OXY).

Occidental Petroleum Corporation (NYSE:OXY) has experienced an increase in activity from the world’s largest hedge funds of late. Occidental Petroleum Corporation (NYSE:OXY) was in 49 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. There were 43 hedge funds in our database with OXY positions at the end of the third quarter. Our calculations also showed that OXY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

At the moment there are several methods market participants use to analyze publicly traded companies. A pair of the most useful methods are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the top money managers can outclass their index-focused peers by a superb margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

John Paulson of Paulson & Co

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 we’re going to take a look at the new hedge fund action surrounding Occidental Petroleum Corporation (NYSE:OXY).

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

At fourth quarter’s end, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OXY over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Occidental Petroleum Corporation (NYSE:OXY) was held by Icahn Capital LP, which reported holding $1534.1 million worth of stock at the end of December. It was followed by Appaloosa Management LP with a $140.2 million position. Other investors bullish on the company included Icahn Capital LP, D E Shaw, and Adage Capital Management. In terms of the portfolio weights assigned to each position Icahn Capital LP allocated the biggest weight to Occidental Petroleum Corporation (NYSE:OXY), around 7.65% of its 13F portfolio. MFN Partners is also relatively very bullish on the stock, setting aside 3.42 percent of its 13F equity portfolio to OXY.

Consequently, key hedge funds have jumped into Occidental Petroleum Corporation (NYSE:OXY) headfirst. Appaloosa Management LP, managed by David Tepper, initiated the biggest position in Occidental Petroleum Corporation (NYSE:OXY). Appaloosa Management LP had $140.2 million invested in the company at the end of the quarter. Renaissance Technologies also made a $34.4 million investment in the stock during the quarter. The other funds with new positions in the stock are John Paulson’s Paulson & Co, Brandon Haley’s Holocene Advisors, and Ben Jacobs’s Anomaly Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Occidental Petroleum Corporation (NYSE:OXY) but similarly valued. These stocks are Expeditors International of Washington, Inc. (NASDAQ:EXPD), PerkinElmer, Inc. (NYSE:PKI), Quest Diagnostics Incorporated (NYSE:DGX), Nucor Corporation (NYSE:NUE), KeyCorp (NYSE:KEY), Citrix Systems, Inc. (NASDAQ:CTXS), and Seagate Technology plc (NASDAQ:STX). All of these stocks’ market caps match OXY’s market cap.

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As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $852 million. That figure was $2151 million in OXY’s case. Quest Diagnostics Incorporated (NYSE:DGX) is the most popular stock in this table. On the other hand Expeditors International of Washington, Inc. (NASDAQ:EXPD) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Occidental Petroleum Corporation (NYSE:OXY) is more popular among hedge funds. Our overall hedge fund sentiment score for OXY is 83.7. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on OXY as the stock returned 46.6% since the end of December (through 4/30) 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.

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