Why Are BP plc (ADR) (BP)’s Richest Investors Running Away?

BP plc (ADR) (NYSE:BP)’s hedge fund sentiment took a downward turn last quarter; here’s how big the drop was.

At the moment, there are dozens of methods market participants can use to analyze the equity markets. A pair of the most under-the-radar are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best investment managers can trounce the S&P 500 by a very impressive margin (see just how much).

Equally as necessary, bullish insider trading activity is another way to analyze the world of equities. Obviously, there are many incentives for an insider to drop shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this tactic if “monkeys” understand where to look (learn more here).

Now that that’s out of the way, let’s analyze the latest info about BP plc (ADR) (NYSE:BP).

How are hedge funds trading BP plc (ADR) (NYSE:BP)?

At Q2’s end, a total of 38 of the hedge funds we track were long in this stock, a change of -14% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably.

Out of the hedge funds we follow, Seth Klarman’s Baupost Group had the biggest position in BP plc (ADR) (NYSE:BP), worth close to $776.3 million, accounting for 19.3% of its total 13F portfolio. On Baupost Group’s heels is Richard S. Pzena of Pzena Investment Management, with a $421.1 million position; the fund has 2.8% of its 13F portfolio invested in the stock. Other peers that are bullish include Frank Brosens’s Taconic Capital, Michael Larson’s Bill & Melinda Gates Foundation Trust and Jonathon Jacobson’s Highfields Capital Management.

Since BP plc (ADR) (NYSE:BP) has experienced declining interest from upper-tier hedge fund managers, it’s safe to say that there exists a select few hedgies that elected to cut their full holdings at the end of the second quarter. Intriguingly, Richard Perry’s Perry Capital cut the biggest position of all the hedgies we monitor, valued at close to $376.9 million in stock, and Daniel S. Och of OZ Management was right behind this move, as the fund sold off about $105.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds at the end of the second quarter.

What do corporate executives and insiders think about BP plc (ADR) (NYSE:BP)?

Insider buying made by high-level executives is best served when the primary stock in question has experienced transactions within the past 180 days. Over the last six-month time frame, BP plc (ADR) (NYSE:BP) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll go over the relationship between both of these indicators in other stocks similar to BP plc (ADR) (NYSE:BP). These stocks are Eni SpA (ADR) (NYSE:E), Royal Dutch Shell plc (ADR) (NYSE:RDS.B), China Petroleum & Chemical Corp (ADR) (NYSE:SNP), Ecopetrol S.A. (ADR) (NYSE:EC), and TOTAL S.A. (ADR) (NYSE:TOT). This group of stocks are the members of the major integrated oil & gas industry and their market caps resemble BP’s market cap.

Using the returns shown by the previously mentioned tactics, regular investors must always keep one eye on hedge fund and insider trading sentiment, and BP plc (ADR) (NYSE:BP) shareholders fit into this picture quite nicely.

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