Hedge Funds Wary of Chinese Economic Slowdown

Even with positive data being released for the U.S. economy and improving European sentiment, hedge funds have a bearish sentiment on commodities because of a possible Chinese economic slowdown. Bullish bets on commodity prices have been reduced for the first time in seven weeks, according to Whitney McFerron of Bloomberg. Since China is the leader in consumption of copper and energy, bets on those commodities have been reduced by the most since December.

McFerron also reports that the U.S. added 227,000 jobs in February, which counteracts the report that European economic growth has slowed. Manufacturing output for the euro region decreased more than analysts projected, according to Markit Economics. The increased investor confidence was also due to the announcement of a deal to burden private bond holders with the mass of Greek debt.

Pacific Investment Management Co.'s MihirWorah said, "The economy is looking better, and there's a general risk-on kind of sentiment. How do I think investor sentiment is? Certainly, they're voting with their money, and we're seeing steady inflows into our funds." After the 0.5% Chinese economic growth target reduction to 7.5% was released, commodity prices fell and then rebounded 2.1% for the next three days. This rebound could mean that the commodity prices are ready for a turnaround.

Business section: Investing ideas
We started this screen with a list of oil and gas companies, and we checked the short transactions on the stocks for covering, implying a bullish sentiment. Do you think these names will follow the commodity turnaround?

List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Diamond Offshore Drilling (NYSE: DO  ) : Operates as an offshore oil and gas drilling contractor worldwide. Market cap at $9.71B. Shares shorted have decreased from 10.44M to 9.57M over the last month, a decrease which represents about 1.26% of the company's float of 68.90M shares

2. Superior Energy Services: Provides specialized oilfield services and equipment to serve the production and drilling related needs of oil and gas companies. Market cap at $4.70B. Shares shorted have decreased from 23.15M to 8.53M over the last month, a decrease which represents about 9.44% of the company's float of 154.88M shares

3. Sunoco: Sunoco,, through its subsidiaries, refines and markets petroleum products, and manufactures chemicals in the United states. Market cap at $4.28B. Shares shorted have decreased from 6.74M to 5.13M over the last month, a decrease which represents about 1.51% of the company's float of 106.52M shares

4. Tesoro (NYSE: TSO  ) : Engages in refining and marketing petroleum products in the United States. Market cap at $4.21B. Shares shorted have decreased from 13.82M to 12.04M over the last month, a decrease which represents about 1.3% of the company's float of 137.43M shares

5. Cheniere Energy Partners: Through its subsidiary, Sabine Pass LNG, L.P., owns and operates the Sabine Pass liquid natural gas (LNG) receiving terminal in western Cameron Parish, Louisiana on the Sabine Pass Channel. Market cap at $4.10B. Shares shorted have decreased from 676.02K to 446.82K over the last month, a decrease which represents about 1.23% of the company's float of 18.68M shares

6. Oasis Petroleum (NYSE: OAS  ) : Engages in the acquisition and development of oil and natural gas resources primarily in the Williston Basin. Market cap at $2.90B. Shares shorted have decreased from 8.38M to 7.63M over the last month, a decrease which represents about 1.72% of the company's float of 43.70M shares

7. InterOil (NYSE: IOC  ) : Engages in the exploration, appraisal, and development of crude oil and natural gas properties in Papua New Guinea. Market cap at $2.87B. Shares shorted have decreased from 8.40M to 7.82M over the last month, a decrease which represents about 1.72% of the company's float of 33.77M shares

8. Western Refining (NYSE: WNR  ) : Operates as an independent crude oil refiner and marketer of refined products in Texas, Arizona, New Mexico, Utah, Colorado, and the Mid-Atlantic region. Market cap at $1.81B. Shares shorted have decreased from 14.35M to 13.54M over the last month, a decrease which represents about 1.51% of the company's float of 53.73M shares

9. Hornbeck Offshore Services: Operates offshore supply vessels (OSVs), multi-purpose support vessels, and a shore-base to provide logistics support and specialty services to the offshore oil and gas exploration and production industry primarily in the United States and Gulf of Mexico. Market cap at $1.48B. Shares shorted have decreased from 5.64M to 5.19M over the last month, a decrease which represents about 1.45% of the company's float of 31.14M shares

10. Northern Oil and Gas: Engages in the acquisition, exploration, development, and production of crude oil and natural gas properties in the Williston basin, the United States. Market cap at $1.45B. Shares shorted have decreased from 17.75M to 17.01M over the last month, a decrease which represents about 1.29% of the company's float of 57.34M shares.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Danny Guttridgedoes not own any of the shares mentioned above.

The Motley Fool owns shares of Western Refining. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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