We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Chevron Corporation (NYSE:CVX).
Is CVX stock a buy or sell? Chevron Corporation (NYSE:CVX) was in 50 hedge funds’ portfolios at the end of December. The all time high for this statistic is 56. CVX has seen an increase in hedge fund interest in recent months. There were 43 hedge funds in our database with CVX positions at the end of the third quarter. Our calculations also showed that CVX isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article).Keeping this in mind we’re going to check out the new hedge fund action surrounding Chevron Corporation (NYSE:CVX).
Do Hedge Funds Think CVX Is A Good Stock To Buy Now?
At Q4’s end, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from one quarter earlier. On the other hand, there were a total of 47 hedge funds with a bullish position in CVX a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
Among these funds, Berkshire Hathaway held the most valuable stake in Chevron Corporation (NYSE:CVX), which was worth $4095.7 million at the end of the fourth quarter. On the second spot was Fisher Asset Management which amassed $476.6 million worth of shares. Diamond Hill Capital, Two Sigma Advisors, and Millennium Management 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 Stamos Capital allocated the biggest weight to Chevron Corporation (NYSE:CVX), around 3.37% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, setting aside 1.6 percent of its 13F equity portfolio to CVX.
Consequently, key hedge funds have been driving this bullishness. Berkshire Hathaway, managed by Warren Buffett, assembled the most valuable position in Chevron Corporation (NYSE:CVX). Berkshire Hathaway had $4.0957 billion invested in the company at the end of the quarter. Till Bechtolsheimer’s Arosa Capital Management also made a $10.6 million investment in the stock during the quarter. The following funds were also among the new CVX investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Matthew Tewksbury’s Stevens Capital Management, and William Harnisch’s Peconic Partners LLC.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Chevron Corporation (NYSE:CVX) but similarly valued. These stocks are Eli Lilly and Company (NYSE:LLY), McDonald’s Corporation (NYSE:MCD), Unilever PLC (NYSE:UL), Danaher Corporation (NYSE:DHR), Medtronic plc (NYSE:MDT), SAP SE (NYSE:SAP), and NextEra Energy, Inc. (NYSE:NEE). All of these stocks’ market caps are closest to CVX’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LLY,50,3028302,-10 MCD,62,2889876,-3 UL,25,1172892,12 DHR,81,5378840,6 MDT,59,2814949,-3 SAP,14,1390775,-2 NEE,61,3078288,-3 Average,50.3,2821989,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 50.3 hedge funds with bullish positions and the average amount invested in these stocks was $2822 million. That figure was $5390 million in CVX’s case. Danaher Corporation (NYSE:DHR) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 14 bullish hedge fund positions. Chevron Corporation (NYSE:CVX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CVX is 63.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. A small number of hedge funds were also right about betting on CVX as the stock returned 24.1% since the end of the fourth quarter (through 3/19) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.