Tag Archives: energy

Top Energy Hedge Funds’ Trades

Energy investments have struggled in recent months. Crowded hedge fund energy bets have done especially poorly. In this piece, we explore the overall hedge fund energy performance and the results of the top stock pickers in the Oil and Gas Production, Integrated Oil, and Oilfield Services Sectors.

Top Energy Hedge Funds

Risk-adjusted return from security selection isolates managers’ stock picking performance and identifies skill. AlphaBetaWorks defines αReturn as a metric of security selection performance – the estimated annual percentage return a fund would have generated in a flat market. This is also the outperformance relative to a passive portfolio with the same market (factor, systematic) risk.

The hedge fund industry has a poor record in the Energy Sector. Over the past 10 years, investors would have made approximately 20% more holding an ETF portfolio with similar market (factor) risk. If markets had been flat for the past 10 years, the average hedge fund long energy portfolio would have declined by approximately 20%.

Over the past three years, the peer group of all medium turnover hedge funds lost approximately 12% picking long energy stocks. On average, if the funds had simply invested in a portfolio of ETFs with the same risk, they would have made 12% more on their energy book. Half of these losses came in 2014:

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2012 -1.08 -0.29 -0.14 0.48 -0.15 -0.28 -0.54 -0.16 0.44 0.10 -0.08 -0.38 -2.06
2013 -0.63 0.12 0.35 -0.74 -0.33 -0.75 0.14 -0.45 -0.32 -0.58 -0.26 0.18 -3.22
2014 0.54 -0.89 -0.23 0.64 -0.90 -0.35 -0.74 -0.01 -1.34 -1.58 -0.45 -1.42 -6.55
2015 -0.77 -0.77

In the following chart we compare the energy αReturns of the top stock pickers to the returns of the group. The top stock pickers’ energy books made 20-80% more than they would have passively:

Chart of the risk-adjusted return from long energy sector security selection of the hedge funds with top performance in the sector

Energy Sector Return from Long Security Selection of the Top Energy Hedge Funds

Fund Energy Sector Security Selection αReturn
Long Positions
Dalton Investments LLC 79.00
Icahn Associates Corp. 47.31
Basswood Capital Management LLC 37.14
Chilton Investment Co. LLC 27.92
Horizon Asset Management LLC 16.74

Top Energy Hedge Funds’ Trades

Since stock picking skills are persistent and predictive, the trades and positions of the best and worst stock pickers are predictive of future stock performance. Investors should pay attention to the bets of the top managers.

We averaged the energy positions of these top performers. The following were their largest position increases and decreases during Q4 2014:

Chart of the average changes in energy sector positions of the top energy stock picking hedge funds

Energy Sector Position Changes of the Top Energy Hedge Funds

Symbol Name Position Change (%)
XOM Exxon Mobil Corporation 20.54
LINE Linn Energy, LLC 2.22
LNCO LinnCo. LLC 1.89
CVX Chevron Corporation 1.55
BBEP BreitBurn Energy Partners L.P. 1.38
SSE Seventy Seven Energy Inc -0.71
WPX WPX Energy, Inc. Class A -0.88
CNQ Canadian Natural Resources Limited -1.04
BHI Baker Hughes Incorporated -1.73
HAL Halliburton Company -6.68

Top Energy Hedge Funds’ Positions

At 12/31/2014, the top performers’ average portfolio consisted of the following positions:

Chart of the average energy sector positions of hedge funds with top energy sector security selection performance

Energy Sector Positions of the Top Energy Hedge Funds

Symbol Name Position (%)
XOM Exxon Mobil Corporation 22.16
HAL Halliburton Company 15.19
CHK Chesapeake Energy Corporation 13.86
CLR Continental Resources, Inc. 7.17
TLM Talisman Energy Inc. 6.51
PARR Par Petroleum Corporation 4.08
SLB Schlumberger NV 2.74
EOG EOG Resources, Inc. 2.52
LINE Linn Energy, LLC 2.22
CVX Chevron Corporation 2.07


  • The hedge fund industry has a poor track record selecting long energy stocks. A typical fund would have done better investing passively, and outside investors would do well to short crowded picks in the sector.
  • Despite the poor industry performance, some funds do have excellent energy stock picking records. These records are persistent and predictive.
  • In recent months, the top energy funds have increased their XOM position and cut HAL. HAL remained a top bet, along with XOM and CHK.
The information herein is not represented or warranted to be accurate, correct, complete or timely.
Past performance is no guarantee of future results.
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