Before we spend many hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of CNOOC Limited (NYSE:CEO).
Is CNOOC Limited (NYSE:CEO) a worthy investment now? The best stock pickers are buying. The number of long hedge fund bets advanced by 2 in recent months. Our calculations also showed that ceo isn’t among the 30 most popular stocks among hedge funds. CEO was in 15 hedge funds’ portfolios at the end of the third quarter of 2018. There were 13 hedge funds in our database with CEO holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the key hedge fund action encompassing CNOOC Limited (NYSE:CEO).
What does the smart money think about CNOOC Limited (NYSE:CEO)?
At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CEO over the last 13 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Arrowstreet Capital was the largest shareholder of CNOOC Limited (NYSE:CEO), with a stake worth $148.9 million reported as of the end of September. Trailing Arrowstreet Capital was Renaissance Technologies, which amassed a stake valued at $121.6 million. Oaktree Capital Management, PEAK6 Capital Management, and Horseman Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, created the biggest call position in CNOOC Limited (NYSE:CEO). PEAK6 Capital Management had $17 million invested in the company at the end of the quarter. John Horseman’s Horseman Capital Management also initiated a $16.1 million position during the quarter. The other funds with new positions in the stock are Lee Ainslie’s Maverick Capital, Ian Cumming and Joseph Steinberg’s Leucadia National, and Noam Gottesman’s GLG Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CNOOC Limited (NYSE:CEO) but similarly valued. These stocks are Comfort Systems USA, Inc. (NYSE:FIX), CRISPR Therapeutics AG (NASDAQ:CRSP), Dillard’s, Inc. (NYSE:DDS), and Forward Air Corporation (NASDAQ:FWRD). This group of stocks’ market valuations match CEO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FIX | 22 | 207509 | 2 |
| CRSP | 16 | 172273 | -1 |
| DDS | 16 | 153752 | 0 |
| FWRD | 15 | 100893 | -1 |
| Average | 17.25 | 158607 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $159 million. That figure was $365 million in CEO’s case. Comfort Systems USA, Inc. (NYSE:FIX) is the most popular stock in this table. On the other hand Forward Air Corporation (NASDAQ:FWRD) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks CNOOC Limited (NYSE:CEO) is even less popular than FWRD. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
