Do Hedge Funds Love Antero Resources Corp (AR)?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Antero Resources Corp (NYSE:AR) has seen a decrease in enthusiasm from smart money in recent months. Antero Resources Corp (NYSE:AR) was in 24 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with Antero Resources Corp (NYSE:AR) positions at the end of the previous quarter. At the end of this article, we will also compare Antero Resources Corp (NYSE:AR) to other stocks, including Markit Ltd (NASDAQ:MRKT), iShares MSCI ACWI Index Fund (NASDAQ:ACWI), and Regency Centers Corp (NYSE:REG) to get a better sense of its popularity.

According to most traders, hedge funds are seen as unimportant, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, Our experts hone in on the masters of this club, about 700 funds. It is estimated that this group of investors presides over the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their first-class equity investments, Insider Monkey has figured out a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

Now, let’s take a look at the new action regarding Antero Resources Corp (NYSE:AR).

What does the smart money think about Antero Resources Corp (NYSE:AR)?

At the end of Q3, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 8% from the second quarter. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Baupost Group, managed by Seth Klarman, holds the biggest position in Antero Resources Corp (NYSE:AR). Baupost Group has a $340.7 million position in the stock, comprising 5.7% of its 13F portfolio. On Baupost Group’s heels is FPR Partners, managed by Bob Peck and Andy Raab, which holds an $200.5 million position; 5% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism comprise Robert Joseph Caruso’s Select Equity Group, Glenn Greenberg’s Brave Warrior Capital, and Ken Griffin’s Citadel Investment Group.

Because Antero Resources Corp (NYSE:AR) has witnessed a bearish sentiment from the smart money, it’s easy to see that there is a sect of hedge funds that slashed their positions entirely in the third quarter. Intriguingly, Alan Fournier’s Pennant Capital Management dumped the largest position of the 700 funds monitored by Insider Monkey, comprising close to $57.9 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund said goodbye to about $3.6 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Antero Resources Corp (NYSE:AR) but similarly valued. These stocks are Markit Ltd (NASDAQ:MRKT), iShares MSCI ACWI Index Fund (NASDAQ:ACWI), Regency Centers Corp (NYSE:REG), and Columbia Pipeline Group Inc (NYSE:CPGX). All of these stocks’ market caps resemble Antero Resources Corp (NYSE:AR)’s market cap.

As you can see, these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $881 million in Antero Resources Corp (NYSE:AR)’s case. Columbia Pipeline Group Inc (NYSE:CPGX) is the most popular stock in this table. On the other hand, iShares MSCI ACWI Index Fund (NASDAQ:ACWI) is the least popular one with only 5 bullish hedge fund positions. Antero Resources Corp (NYSE:AR) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Columbia Pipeline Group Inc (NYSE:CPGX) might be a better candidate to consider a long position.