Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Cobalt International Energy, Inc. (NYSE:CIE) .
Is Cobalt International Energy, Inc. (NYSE:CIE) an excellent investment now? Hedge funds are categorically getting more optimistic. The number of long hedge fund bets that are revealed through the 13F filings inched up by 1 in recent months. CIE was in 18 hedge funds’ portfolios at the end of the third quarter of 2016. There were 17 hedge funds in our database with CIE holdings at the end of the previous quarter. At the end of this article we will also compare CIE to other stocks including CalAmp Corp. (NASDAQ:CAMP), Stoneridge, Inc. (NYSE:SRI), and Actua Corp (NASDAQ:ACTA) to get a better sense of its popularity.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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Hedge fund activity in Cobalt International Energy, Inc. (NYSE:CIE)
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 6% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in CIE at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Paulson’s Paulson & Co has the largest position in Cobalt International Energy, Inc. (NYSE:CIE), worth close to $83.3 million. The second most bullish fund manager is York Capital Management, led by James Dinan, which holds a $54.1 million position; 1.7% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Clint Carlson’s Carlson Capital, and Kenneth Tropin’s Graham Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As one would reasonably expect, some big names have jumped into Cobalt International Energy, Inc. (NYSE:CIE) headfirst. Eton Park Capital, led by Eric Mindich, created the most valuable position in Cobalt International Energy, Inc. (NYSE:CIE). Eton Park Capital had $2 million invested in the company at the end of the quarter. Steve Ketchum’s Sound Point Capital also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new CIE investors: Jerome L. Simon’s Lonestar Capital Management, Ken Griffin’s Citadel Investment Group, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now review hedge fund activity in other stocks similar to Cobalt International Energy, Inc. (NYSE:CIE). We will take a look at CalAmp Corp. (NASDAQ:CAMP), Stoneridge, Inc. (NYSE:SRI), Actua Corp (NASDAQ:ACTA), and SciClone Pharmaceuticals, Inc. (NASDAQ:SCLN). This group of stocks’ market caps match CIE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAMP | 11 | 26780 | -6 |
| SRI | 24 | 100450 | 3 |
| ACTA | 8 | 17469 | 0 |
| SCLN | 20 | 64807 | 6 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $281 million in CIE’s case. Stoneridge, Inc. (NYSE:SRI) is the most popular stock in this table. On the other hand Actua Corp (NASDAQ:ACTA) is the least popular one with only 8 bullish hedge fund positions. Cobalt International Energy, Inc. (NYSE:CIE) 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 SRI might be a better candidate to consider taking a long position in.
Disclosure: None
