Chesapeake Energy Corporation (NYSE:CHK)’s stock maintained yesterday’s rally after the company revealed in an SEC filing on Monday that it is entering into a privately-negotiated purchase and exchange agreement. The Oklahoma based oil and Gas Company is set to exchange $0.01 per share of common stock with some of its outstanding senior notes. The filing states that the company has agreed to issue more than 37 million shares in exchange for about $166 million in aggregate principal amount due on four different issues of senior notes. These shares are approximately 5.2% of the company’s entire common share float. The latest debt-to-equity swap will help the company to pay off its massive $9 billion debt and undo the damage done by the plunging oil prices. Chesapeake Energy Corporation (NYSE:CHK) has also reduced its spending to tackle the liquidity crisis.
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To the average investor there are many signals market participants put to use to appraise their stock investments. A couple of the less known signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform the S&P 500 by a healthy amount (see the details here).
With all of this in mind, we’re going to take a look at the fresh action regarding Chesapeake Energy Corporation (NYSE:CHK).
At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, down by one from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Carl Icahn’s Icahn Capital LP has the biggest position in Chesapeake Energy Corporation (NYSE:CHK), worth close to $301 million, accounting for 1.4% of its total 13F portfolio. Sitting at the No. 2 spot is Robert Pitts’ Steadfast Capital Management, with a $34.2 million position; 0.8% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish contain David E. Shaw’s D E Shaw, John Griffin’s Blue Ridge Capital and Sander Gerber’s Hudson Bay Capital Management.
On the next page we are going to take a closer look at the funds that closed their entire positions in Chesapeake Energy during the first quarter. In addition, a stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks, which is why we will examine companies such as HSN, Inc. (NASDAQ:HSNI), Companhia Siderurgica Nacional (ADR) (NYSE:SID), and AMC Entertainment Holdings Inc (NYSE:AMC) to gather more data points.
Due to the fact that Chesapeake Energy Corporation (NYSE:CHK) has experienced a slightly bearish sentiment from the smart money, logic holds that there were a few fund managers that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Sander Gerber’s Hudson Bay Capital Management dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth about $48.3 million in stock. Gordy Holterman and Derek Dunn’s fund, Overland Advisors, also sold off its stock, about $26.6 million worth.
Let’s now take a look at hedge fund activity in other stocks similar to Chesapeake Energy Corporation (NYSE:CHK). We will take a look at HSN, Inc. (NASDAQ:HSNI), Companhia Siderurgica Nacional (ADR) (NYSE:SID), AMC Entertainment Holdings Inc (NYSE:AMC), and F.N.B. Corp (NYSE:FNB). This group of stocks’ market values are closest to CHK’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HSNI | 15 | 88134 | 1 |
| SID | 4 | 201 | 0 |
| AMC | 15 | 70810 | -1 |
| FNB | 12 | 53319 | -1 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $727 million in CHK’s case. HSN, Inc. (NASDAQ:HSNI) is the most popular stock in this table. On the other hand, Companhia Siderurgica Nacional (ADR) (NYSE:SID) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Chesapeake Energy Corporation (NYSE:CHK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
