Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Pioneer Natural Resources Company (NYSE:PXD) changed recently.
Is PXD a good stock to buy now? Pioneer Natural Resources Company (NYSE:PXD) has seen an increase in hedge fund sentiment lately. Pioneer Natural Resources Company (NYSE:PXD) was in 42 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 74. Our calculations also showed that PXD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Bruce Kovner, Caxton Associates LP
Bruce Kovner of Caxton Associates LP
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now let's take a gander at the recent hedge fund action encompassing Pioneer Natural Resources Company (NYSE:PXD).
Do Hedge Funds Think PXD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the second quarter of 2020. On the other hand, there were a total of 50 hedge funds with a bullish position in PXD a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Two Sigma Advisors was the largest shareholder of Pioneer Natural Resources Company (NYSE:PXD), with a stake worth $71.1 million reported as of the end of September. Trailing Two Sigma Advisors was Holocene Advisors, which amassed a stake valued at $27.1 million. Citadel Investment Group, Adage Capital Management, and Arrowstreet Capital 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 Covalent Capital Partners allocated the biggest weight to Pioneer Natural Resources Company (NYSE:PXD), around 1.71% of its 13F portfolio. Value Holdings LP is also relatively very bullish on the stock, earmarking 1.41 percent of its 13F equity portfolio to PXD.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Pioneer Natural Resources Company (NYSE:PXD). Balyasny Asset Management had $9.9 million invested in the company at the end of the quarter. Steve Zheng's Deepcurrents Investment Group also initiated a $7.8 million position during the quarter. The other funds with new positions in the stock are OZ Management, Bruce Kovner's Caxton Associates LP, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Pioneer Natural Resources Company (NYSE:PXD) but similarly valued. We will take a look at HEICO Corporation (NYSE:HEI), Catalent Inc (NYSE:CTLT), Brookfield Infrastructure Partners L.P. (NYSE:BIP), Tiffany & Co. (NYSE:TIF), Wix.Com Ltd (NASDAQ:WIX), PerkinElmer, Inc. (NYSE:PKI), and Tyler Technologies, Inc. (NYSE:TYL). This group of stocks' market valuations are closest to PXD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HEI,43,712400,-3 CTLT,40,618061,5 BIP,13,50744,1 TIF,61,2294401,-3 WIX,36,1104994,9 PKI,36,1750632,6 TYL,31,520210,-5 Average,37.1,1007349,1.4 [/table]
As you can see these stocks had an average of 37.1 hedge funds with bullish positions and the average amount invested in these stocks was $1007 million. That figure was $270 million in PXD's case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Brookfield Infrastructure Partners L.P. (NYSE:BIP) is the least popular one with only 13 bullish hedge fund positions. Pioneer Natural Resources Company (NYSE:PXD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PXD is 57.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on PXD as the stock returned 32.9% since the end of Q3 (through 12/8) 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.
