Were Hedge Funds Right About Occidental Petroleum Corporation (OXY)?

In this article we will analyze whether Occidental Petroleum Corporation (NYSE:OXY) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Occidental Petroleum Corporation (NYSE:OXY) was in 57 hedge funds’ portfolios at the end of June. The all time high for this statistic is 62. OXY has seen an increase in enthusiasm from smart money recently. There were 52 hedge funds in our database with OXY positions at the end of the first quarter. Our calculations also showed that OXY isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Carl Icahn of Icahn Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium 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. Keeping this in mind let’s go over the recent hedge fund action surrounding Occidental Petroleum Corporation (NYSE:OXY).

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

At second quarter’s end, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in OXY a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in Occidental Petroleum Corporation (NYSE:OXY) was held by Icahn Capital LP, which reported holding $1536.2 million worth of stock at the end of June. It was followed by GQG Partners with a $547.4 million position. Other investors bullish on the company included Icahn Capital LP, Appaloosa Management LP, and Paulson & Co. In terms of the portfolio weights assigned to each position Key Square Capital Management allocated the biggest weight to Occidental Petroleum Corporation (NYSE:OXY), around 8.19% of its 13F portfolio. Arosa Capital Management is also relatively very bullish on the stock, earmarking 6.78 percent of its 13F equity portfolio to OXY.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. GQG Partners, managed by Rajiv Jain, initiated the most outsized position in Occidental Petroleum Corporation (NYSE:OXY). GQG Partners had $547.4 million invested in the company at the end of the quarter. Ryan Caldwell’s Chiron Investment Management also initiated a $20 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Frank Brosens’s Taconic Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Occidental Petroleum Corporation (NYSE:OXY) but similarly valued. These stocks are Equifax Inc. (NYSE:EFX), AvalonBay Communities Inc (NYSE:AVB), Arthur J. Gallagher & Co. (NYSE:AJG), Ameriprise Financial, Inc. (NYSE:AMP), EPAM Systems Inc (NYSE:EPAM), Best Buy Co., Inc. (NYSE:BBY), and Equity Residential (NYSE:EQR). This group of stocks’ market valuations are similar to OXY’s market valuation.

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As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1032 million. That figure was $3620 million in OXY’s case. Arthur J. Gallagher & Co. (NYSE:AJG) is the most popular stock in this table. On the other hand AvalonBay Communities Inc (NYSE:AVB) is the least popular one with only 26 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 87.6. 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 returned 26.3% in 2021 through October 29th but still managed to beat the market by 2.3 percentage points. Hedge funds were also right about betting on OXY as the stock returned 7.3% since the end of June (through 10/29) 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.

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