ConocoPhillips (COP): Are Hedge Funds Right About This Stock?

·5 min read

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is ConocoPhillips (NYSE:COP), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is ConocoPhillips (NYSE:COP) a cheap investment right now? Investors who are in the know were taking a bullish view. The number of bullish hedge fund bets improved by 2 recently. ConocoPhillips (NYSE:COP) was in 51 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 70. Our calculations also showed that COP isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 let's take a glance at the fresh hedge fund action regarding ConocoPhillips (NYSE:COP).

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

Heading into the second quarter of 2021, a total of 51 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from the fourth quarter of 2020. By comparison, 54 hedge funds held shares or bullish call options in COP a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in ConocoPhillips (NYSE:COP) was held by Fisher Asset Management, which reported holding $282.7 million worth of stock at the end of December. It was followed by Adage Capital Management with a $218.6 million position. Other investors bullish on the company included Millennium Management, Laurion Capital Management, and Yacktman Asset Management. In terms of the portfolio weights assigned to each position Elm Ridge Capital allocated the biggest weight to ConocoPhillips (NYSE:COP), around 4.54% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, designating 3.15 percent of its 13F equity portfolio to COP.

Now, some big names were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, initiated the most valuable position in ConocoPhillips (NYSE:COP). Adage Capital Management had $218.6 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan's SIR Capital Management also initiated a $18.7 million position during the quarter. The following funds were also among the new COP investors: Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors.

Let's now review hedge fund activity in other stocks similar to ConocoPhillips (NYSE:COP). These stocks are NetEase, Inc (NASDAQ:NTES), Chubb Limited (NYSE:CB), Becton, Dickinson and Company (NYSE:BDX), Illinois Tool Works Inc. (NYSE:ITW), Norfolk Southern Corp. (NYSE:NSC), KE Holdings Inc (NYSE:BEKE), and Dell Technologies Inc. (NYSE:DELL). This group of stocks' market valuations match COP's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NTES,32,3501491,-6 CB,41,1605208,7 BDX,65,3732947,0 ITW,33,411615,-7 NSC,46,898621,2 BEKE,33,2308833,3 DELL,54,4834607,4 Average,43.4,2470475,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 43.4 hedge funds with bullish positions and the average amount invested in these stocks was $2470 million. That figure was $1205 million in COP's case. Becton, Dickinson and Company (NYSE:BDX) is the most popular stock in this table. On the other hand NetEase, Inc (NASDAQ:NTES) is the least popular one with only 32 bullish hedge fund positions. ConocoPhillips (NYSE:COP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for COP is 57.6. 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 gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on COP, though not to the same extent, as the stock returned 9.5% since Q1 (through June 18th) and outperformed the market as well.

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

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