BALTIMORE (Stockpickr) -- The energy sector has been a strong performer so far in 2014: For instance, since the calendar flipped to January, the Vanguard Energy ETF (VDE) has given investors total returns of 10.7%. That's nearly a third more performance than you'd have gotten with the S&P 500 over that same span. And other big energy index funds are posting similar double-digit returns year-to-date too.
So then, why do hedge funds hate energy stocks right now?
Last quarter, energy wasn't just the only sector that saw net selling among hedge funds -- the "smart money" reduced their holdings in energy by a whopping 12% in the aggregate during the period. That's by far the biggest conviction bet I've seen against a single sector during a quarter.
But while it's interesting to know that funds hate energy stocks, it's a lot more useful to figure out which specific names top off their hate lists this summer. After all, it's the sell list -- the names that institutional investors hate the most -- that represents some of the biggest conviction moves. Scouring fund managers' hate list is valuable for two important reasons: it includes names you should sell too, and it includes names that they're wrong about selling.
Why would you ever buy a name that pro investors hate? It's because, often, when investors get emotionally involved with the names in their portfolios, they do the wrong thing. The big performance gap between hedge funds and the S&P 500 index in the last year and change is proof of that. So that leaves us free to take a more sober look at the names fund managers are capitulating on.
Luckily for us, we can get a glimpse at exactly which stocks top hedge funds' hate lists by looking at 13F statements. Institutional investors with more than $100 million in assets are required to file a 13F, a form that breaks down their stock positions for public consumption. From hedge funds to mutual funds to insurance companies, any professional investors who manage more than that $100 million watermark are required to file a 13F.
So, without further ado, here's a look at five energy stocks fund managers hate…