Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Suncor Energy Inc. (NYSE:SU) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Hedge fund interest in Suncor Energy Inc. (NYSE:SU) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare SU to other stocks including Arthur J. Gallagher & Co. (NYSE:AJG), American Water Works Company, Inc. (NYSE:AWK), and Nokia Corporation (NYSE:NOK) to get a better sense of its popularity.
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 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. Now we’re going to take a gander at the recent hedge fund action encompassing Suncor Energy Inc. (NYSE:SU).
Dan Loeb of Third Point
Do Hedge Funds Think SU Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2021. On the other hand, there were a total of 22 hedge funds with a bullish position in SU a year ago. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Suncor Energy Inc. (NYSE:SU), which was worth $184 million at the end of the third quarter. On the second spot was D E Shaw which amassed $157.5 million worth of shares. Lyrical Asset Management, Third Point, and Holocene Advisors 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 NewGen Asset Management allocated the biggest weight to Suncor Energy Inc. (NYSE:SU), around 5.82% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 2.93 percent of its 13F equity portfolio to SU.
Judging by the fact that Suncor Energy Inc. (NYSE:SU) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who were dropping their entire stakes heading into Q4. Interestingly, Charles Davidson and Joseph Jacobs’s Wexford Capital dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $19.5 million in stock, and Scott Bessent’s Key Square Capital Management was right behind this move, as the fund said goodbye to about $10.8 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Suncor Energy Inc. (NYSE:SU) but similarly valued. We will take a look at Arthur J. Gallagher & Co. (NYSE:AJG), American Water Works Company, Inc. (NYSE:AWK), Nokia Corporation (NYSE:NOK), Phillips 66 (NYSE:PSX), Liberty Broadband Corp (NASDAQ:LBRDA), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Chunghwa Telecom Co., Ltd (NYSE:CHT). This group of stocks’ market values resemble SU’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AJG | 32 | 1388489 | -8 |
| AWK | 28 | 1127944 | -2 |
| NOK | 22 | 388301 | -4 |
| PSX | 34 | 409385 | 8 |
| LBRDA | 24 | 885745 | -4 |
| ZBH | 47 | 1664979 | -1 |
| CHT | 6 | 156827 | -1 |
| Average | 27.6 | 860239 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $860 million. That figure was $1085 million in SU’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 6 bullish hedge fund positions. Suncor Energy Inc. (NYSE:SU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SU is 60.1. 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 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on SU as the stock returned 39.7% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
